Dedicated readers of TGIF 2 Minutes will recall highlights two weeks ago of Morgan Housel’s excellent book, The Psychology of Money. Digging deeper into the book revealed the theme that human nature and psychology most often lead people to hear – and believe – only what they want to hear and believe or see happen.
This statement is not an insult or meant to sound arrogant. Rather, in matters of money, financial markets and even the economy there is evidence that people, the more they want something to be true, most often will believe a story that overestimates the odds of the story being true.* The markets, following recent comments by Fed Chairman Jerome Powell, nudged UP on thoughts the Fed might “pivot” (meaning: possibly slow the pace of interest rate increases and even lower interest rates next year – a wishful “story”). But more recent moves down in markets reflect the less popular belief that the US Federal Reserve likely will NOT reverse course, thus continuing to raise interest rates until inflation shows evidence of cooling.
