2 months, 2 weeks ago

5 ideas for avoiding an overemphasis on short-term results.

Recency bias is the tendency to place too much weight on the latest performance trends while giving short shrift to other factors, such as fundamentals, valuation, or long-term market averages. The market’s inherent cyclicality means that prevailing market trends will eventually reverse, although it’s impossible to predict exactly when that might happen. Think about performance in the context of macroeconomic regimes For example, the Federal Reserve’s zero interest-rate policy prevailed over most of the period from 2009 through early 2022. Think about counterfactuals One of Warren Buffett’s more famous quotes is, “You pay a very high price in the stock market for a cheery consensus.” In other words, if almost everyone seems to agree on a certain market outlook, it’s probably already built into market price tags.

Associated Press
Stocks Market Period Set Performance Trends

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