Today we’re going to piggyback of our conversation in the last episode by focusing in on recency bias and show you how the concept plays itself out among investors. As Michael will explain, recency bias is the tendency to give more weight to the most recent information when making decisions, which can often lead to skewed perceptions and poor financial choices.
To help you better understand this bias and avoid letting it sway your financial decisions, we’re going to look back at the historical performance of large cap U.S. stock, specifically the S&P 500, over the last century. We’ll also cover the current landscape of interest rates and mortgage rates before touching on the role of inflation in shaping financial strategies. By understanding and mitigating the effects of cognitive biases like recency bias, investors can make more rational and informed decisions, ultimately enhancing their financial well-being.
Here’s some of what we discuss in this episode:
- A look at the numbers from stock returns since 1928.
- Treasury bill rates are indicative of what you could be receiving inside money market accounts.
- We’re almost right at historical averages for mortgage rates going back to 1964.
- How we build investment strategies with these biases in mind.
See the graphs referenced in this show:
Mortgage Rates: https://caffeinecashflow.com/wp-content/uploads/2025/01/Mortgage-Rates-since-1964-LBS.pdf
Treasury Bills: https://caffeinecashflow.com/wp-content/uploads/2025/01/Treasury-Bills-historical-rates-LBS.pdf
Large Company Stocks: https://caffeinecashflow.com/wp-content/uploads/2025/01/Large-Company-Stocks-LBS.pdf
Call Michael at 702-767-4897 with any of your questions or email michael.schulte@westpacwealth.com.
