Have you ever thought about how you make the choices that shape your life?  Whether it’s a new home purchase, a career change, or shift in financial priorities — it matters how we get to the final results.  Humans make decisions first and then do their research, and that's backward. 

Here’s a common thought process that doesn’t always serve us. 

1. Have an idea.
2. “Somebody Smart” questions the idea.
3. Call a friend.
4. A friend tells us it’s a good idea.
5. “See, it’s a great idea!”
6. Carry out the great idea.
7. The great idea often turns out to be a bad idea.
8. Oh well, it was fun anyway.
9. “Somebody Smart” rolls their eyes.
10. Aaaand… repeat.

Academics have a name for this behavior: it’s called Confirmation Bias.  You’ve probably heard of it.  It’s the process of making a decision before we do our research. Not only do we put the cart before the horse, but when we actually get around to doing our “research,” it just consists of gathering evidence that supports what we’ve already decided and dismisses anything we don't agree with.

We all do this.  And it’s an incredibly difficult habit to break.  But that’s not to say impossible.

There is one way we’ve found to circumvent this behavior.  Let’s call it the Confirmation Bias Prevention Program.  Here’s how it works.

1. Find someone who disagrees with a decision you’re about to make.
2. Ask them why they disagree with you.
3. Carefully listen to what they have to say.  Listen, as Stephen R. Covey says, “with the goal to understand, not to be understood.”
4. Continue listening until you can honestly say, “I now understand why you believe that.”

That’s it, it’s that simple.  This doesn’t guarantee you won’t do the thing you want to do… but that’s not the point.  The point is to carefully and thoughtfully analyze the pros and cons of a decision so you can make it in an unbiased way.  The Confirmation Bias Prevention Program is a great step in that direction.

If you’re facing some big decisions remember to use your Eagle Wealth team as a sounding board.  We’re here to help offer new perspectives and creative solutions, or just help you talk about what it is you really want. 

Happy Monday,

Your Eagle Wealth Team

The Week on Wall Street

A Friday rebound, triggered by a big tech company’s earnings beat and a strong jobs report, shaved much of the week’s accumulated losses.

The Dow Jones Industrial Average fell 1.24%, while the Standard & Poor’s 500 lost 0.80%. The Nasdaq Composite Index was flat (+0.07%) for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 0.62%.^1,2,3

Stocks See-Saw

Renewed regional bank concerns weighed on investor sentiment last week, despite the rescue of a troubled bank before the start of the trading week.

But worries were not isolated to regional banks. Secretary of the Treasury Janet Yellen commented that the federal government may hit its debt ceiling earlier than expected, heightened investor jitters over a potential technical default. The stock market also slipped in the wake of the latest rate hike decision by the Federal Open Market Committee (FOMC).

Solid earnings from one mega-cap tech firm and a strong employment report steadied investors, resulting in a Friday bounce that ended a volatile week on a positive note. 

Fed Hikes Rates

Amid concerns in the regional bank sector and tightening credit conditions, the Fed elected to increase interest rates by 0.25%, citing elevated inflation and robust job gains. Investors were more focused, however, on what the Fed signaled about its plans since the expected rate hike.

The Fed indicated it may pause further rate hikes, suggesting that future decisions will be based on economic data and prevailing financial conditions. Following the announcement, interest rate traders assigned an 89% probability that rates would remain unchanged following the next meeting of the FOMC in June.^{4, 5}