October 23, 2023
AI and Behavioral Finance
As investors, we all love reviewing an investment that’s soared in value. We love not just the increasingly higher dollar value, but how smart it makes us feel about our ability to predict this particular future. And as honest investors, we know this feeling is biased. If we understand how this self-attribution bias creeps into […]
September 22, 2023
Good News for Investors Affected by Framing Bias
When we formed Sunpointe, we chose the name because one of our goals was to “shine a bright light of transparency” on investment products. My perspective on the new SEC fund disclosure rule is below, but first – the behavioral reason regulatory updates like this are so important. A few weeks ago I gave a […]
July 19, 2023
When to extend?
Many investors are currently deciding whether to extend the duration of the fixed income part of their portfolios or wait until it is clear the Federal Reserve has stopped raising rates. Given that fixed income yields have risen this year, long-term forward-looking potential returns appear much better than in prior decades. We find that early […]
June 20, 2023
Market Breadth – what does it tell us now?
As many investors have noticed, the S&P 500 equity index has been powered this year by a small group of mega-cap technology stocks. These stocks are shown below in the chart as of June 1, 2023. Yardeni Research has termed this group the Mega-Cap 8. In Wall Street parlance, “market breadth” can be measured […]
May 23, 2023
2022 – A Behavioral Perspective
As many investors know, diversification across stocks and bonds did not work last year; a traditional 60/40 stock/bond mix was down in the range of 15% in 2022. Since the beginning of 2023, we have received several questions about diversification – such as, “Is diversification ‘dead’ because last year bonds did not provide protection against […]
April 20, 2023
Recency Bias and the Nasdaq 100
Many of you know that I have written extensively on the topic of behavioral finance. In today’s market, I am highlighting recency bias which occurs when people more prominently recall and emphasize recent observations rather than putting the current situation into historical perspective. For example, suppose a cruise ship passenger is looking off the observation […]
March 30, 2023
Opening Day and The Asset Class where you should put ALL your Money
Opening Day of the Major League Baseball (MLB) season brings excitement around the country, especially here in St. Louis. For me, it’s both the limitless opportunity that the year presents, and the memories of years and games gone by with family and friends. So, what does this have to do with investing? It also reminds […]
February 15, 2023
Have your Cake and Eat it too?
The speaker at a lecture I recently attended was very well educated, with a Ph.D. in Economics from Stanford. He opened with obligatory humor, saying that although he was a Ph.D. he did not put “Dr” in front of his name. He joked that this was because he couldn’t save anyone if someone yelled “is […]
January 17, 2023
Recognizing What’s Next
As many of you know, I am a student (and teacher) of investor behavior. I love that behavioral finance is not only endless, but that it repeats. I am constantly on the lookout for new ways to interpret investor behavior in current markets. I recently read an article that referenced the 100th birthday party of […]
December 19, 2022
What are investors concerned about ….inflation or recession…or both?
In the aftermath of the Great Financial Crisis (GFC), I began to observe a new phenomenon in the equity markets. It seemed to be that whenever there was bad news economically, the stock market went up. The bad news was good news for equities. Why? Investors were focused on the reaction of the Federal Reserve […]
November 21, 2022
Inflection Point- Where Are Rates Going?
In mid-November 2022, St. Louis Fed President James Bullard estimated that the target for the federal funds rate is between 5% and 7% and that is what’s needed to sufficiently slow economic growth and produce a meaningful decline in inflation. Since this prognostication, two different cases are emerging for where interest rates are going. One says […]
September 27, 2022
The Strong US Dollar: A Double Edged Sword
There is a common theme running through many conversations of parents of college aged “young adults”: I want to live like them! So many are living abroad, enjoying what the world has to offer, studying, learning – exploring the world. I remember going to Europe in college – and spending French Francs at a café […]