As mentioned in the article below, confirmation bias is defined as “the tendency to process information by looking for or interpreting data consistent with what you already believe.”
https://www.denverpost.com/2020/07/19/improving-investor-behavior-blind-spots-and-confirmation-bias/
Try this exercise:
The Presidential candidate named _________________ is bad because_______________________, and if they get re-elected/elected ________________ will happen…. which will make the market go down. Pretty easy right?
Confirmation bias can create blind spots around other events that could occur. We all have a tendency to get caught up in whatever we feel is the “primary event.” For many people, that event would be that “bad candidate” gets re-elected/elected and causes “_______________” to happen. This blinds us to the other possibilities such as coronavirus vaccine discovery, government stimulus, etc. etc. etc.
While it is entirely possible that the scenario you envision could play out, other things just happen. My advice as it applies to your investments is to be aware of confirmation bias during what will be an emotionally-charged election season. The key is to have a long-term investment strategy, and sometimes, you just need to see how things play out. After all, did you predict in late- March that the Dow would be above 29,000 for a bit in September? Probably not.
Any opinions are those of Wheeler Financial LLC and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete.
Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance does not guarantee future results.
