Market Minute Jan 28, 2013

Confirmation Bias

Fill in the blank with the bullets provided below.

“Are we in a ________?”

Each of these bullet points is a stark reminder of the vast amount of jockeying occurring in financial markets. It is not difficult to find countervailing views for each of these topics. It is the contrast of opinions that sets the stage for both constructive disagreements and divisive arguments. It is within this framework that I resolve to find middle ground.
Confirmation bias is a tendency of people to favor information that confirms their beliefs or suppositions.
This past week Bulls pitched a perfect game increasing every session, closing up 1.8% for the week. Bears on the other hand grumbled indistinctly about national travails, federal debts, deficit spending and European contraction. Each side can present a fair case to support and convey its view (prudent investors will carefully examine each). It is this confirmation bias that can be friend or foe. Take notice if you sense your decision is founded by confirmation bias, if so, then research why that view could be wrong.
It may not take more than a minute.