A Bad Case of Confirmation Bias

Affirmation Bias – The tendency to search for and favor info that confirms your prior perception.

Initially of this yr, I used to be satisfied that the US Federal Reserve would begin mountaineering rates of interest sooner moderately than later and that US Treasury bond yields would rise accordingly. Because the yr progressed, I felt that the Fed was overlooking the potential improve and stickiness of inflation – transitory, actually? – and that the yield on the 10-year UST would hit 2%. By the top of the yr on the very newest. Even when bond yields stayed low, I felt certain that the market pricing was incorrect and located many articles that agreed with me, boosting my perception additional. As yields started to fall, my frustrations grew, and I began to consider {that a} ‘bond tantrum’ would seemingly happen inside weeks with yields hovering to the degrees I anticipated. Nothing occurred and when the yield on the 10-year UST fell to round 1.25% in mid-July, I threw within the towel. And to make issues even worse, for years I traded company and authorities bonds for a dwelling on behalf of a spread of banks. If I had made this yr’s name at any of these banks, I’d have been job searching by Autumn.

The issue with affirmation bias is that you simply change into more and more cussed together with your outlook with any worth motion that strikes towards your place mistaken in your view. This will result in different deadly buying and selling errors together with eradicating your cease loss or doubling down. Subsequent yr I’ll study to be humbler and attempt to all the time learn, correctly, the alternative argument to my view and be trustworthy sufficient with myself to confess when I’m mistaken.


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