Forecasting the Decade Ahead
During market corrections, we tend to look to the past to reassure ourselves that we’ve been here before. We take comfort in statistics indicating how quickly the market has recovered on average from past bear markets. It’s true we have been through other crises.
When faced with making a decision or prediction of the future, we have a tendency to overweight recent information and extrapolate that information into the future. Recency bias is a mental “shortcut.” We were overly confident and bullish at the end of 2019 and likely are overly bearish now.