Why I Don’t Talk About Current Events
You’ve probably noticed I try not to talk about current events on this blog. There are a ton of reasons why, but here’s the main one: hindsight bias.
Hindsight bias is often called the “I knew it all along” bias. It tricks us into thinking past events were more predictable than they were.
Two quick examples:
- In 2020, oil went negative. It felt like the world was ending. Few wanted to touch it. But after prices rebounded, it suddenly became “an obvious buying opportunity.”
- During the early days of COVID, as lockdowns loomed, markets crashed. American tech stocks tanked along with everything else before bottoming out on March 23rd. Many of those stocks doubled or tripled by year-end. And now? It all feels obvious: “Of course tech would thrive.”
We’ve heard a lot about tariffs over the past few months. Will they happen? Won’t they? If they do, how serious will they be? How long will they last? What will they mean for xyz and abc?
All fair questions, but nobody knew the answers a few months ago, and nobody knows them now. We’ll only know after the fact.
Tariffs could be reversed next week and the market might rip higher. Or they could become normal and weigh on profits for years. Nobody knows. But here’s what we do know: something else will eventually take over the headlines.
The market dropped more than 5% on Thursday. That feels big because it is. But it doesn’t mean anything yet. People will scramble to explain it, and soon enough, someone will say it was obvious. Just like always.
This is why we stick to the plan. Not because we know what’s coming (we don’t) but because reacting makes things worse.
This one feels bad, I know. But every drop feels bad.
Markets fall, people panic, markets recover. This will be in the rear view in no time. Like everything before it. And when it is in the rear view, it’ll feel like it was obvious. That’s the trap. That’s hindsight bias.
