Humans are inclined to prefer not losing over winning. We feel the pain of loss more than the joy of gain. This impacts our ability to trade effectively.
USD bulls are back, oil is almost at $90, & US rates remain high. While many may spin this into a “strong economy” narrative, the US yield curve disagrees.
Our minds are clouded by the outcome bias when we are too focused on the results of our actions, as opposed to the decision making process which led to them.
Monday saw a blood bath in markets which was followed by an even larger bounce. Could this mean that the bottom is in for equities?
The anchoring bias is our tendency to use reference points to compare outcomes with. This could be an entry price, a price target, or recent highs/lows.
Interest rates and oil prices continue to capture the headlines, but are things as rosy as the rallies in both imply? Not if you look at other markets.
The Evergrande contagion has begun to affect China’s largest developer. This could mark the point at which the contagion embarks on its next phase.
As long as the world relies on a reserve currency that is distributed by banks, global USD crises will occur. FIMA is but a band aid over a systemic problem.
Everyone’s need for Dollars, and their inability to print them, led ex-US Treasury Secretary John Connally to call the USD “our currency, but your problem”.