AUG · ISSUE 35 · August 29, 2026
CONCEPTRecency bias
Your brain assumes whatever just happened will keep happening. In markets, that shortcut costs money.
WHAT IT IS
A shortcut
an automatic one
WHAT IT DOES
Extrapolates
the recent past
THE COST
Buy high
sell low
THE IDEA
Yesterday ≠ Tomorrow
the recent past is not a promise
Recency bias is the tendency to give more weight to what just happened than to all the history before it. If the market has been rising quietly for weeks, your mind assumes it will keep going, exactly when doubt serves you best.
AUG · ISSUE 35
THE EFFECTYesterday weighs more
2x
more weight on the recent than on the historical average
The brain overvalues what it just lived through. That is why a short streak feels like a permanent trend. An illustrative figure for the effect, not an exact measure.
Realizing you overweight the recent is the first step to not letting one month decide a strategy built for years.
- OVERWEIGHT
- — To give a data point more importance than it deserves.
- HISTORICAL AVERAGE
- — Long-run typical behavior, not this week's move.
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PRINCIPLECalm deceives
“The greatest risk tends to arrive once everyone has decided there is no risk left.”
When volatility has been low for a while, recency bias convinces you it will stay low: precisely the moment to stay alert.
- VOLATILITY
- — How much an asset moves: more movement, more uncertainty.
- COMPLACENCY
- — Excess calm that often precedes surprises.
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HOW IT LOOKSWhere the bias catches you
After a quiet climb, the bias makes you buy high, sure it will continue. The reversal arrives when you felt most certain. An illustration of the concept, not real data.
The point of peak optimism, where you extrapolate the calm, is usually the point of peak risk.
- REVERSION
- — A price returning toward its average after moving far from it.
- EXTREME
- — A zone of euphoria or panic where the bias hits hardest.
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SIGNSFour traps of recency bias
Buying at the top
After weeks of gains you believe it cannot fall, and you buy exactly when risk is highest.
Selling at the bottom
After a drop you assume it will keep falling, and you sell exactly at the worst moment.
Chasing past returns
You pick the fund that rose most last year, ignoring that the past does not guarantee the future.
Forgetting mean reversion
You assume the expensive keeps rising and the cheap keeps falling, when both tend back toward their average.
Spotting these four traps is what separates a considered decision from an emotional reaction to the latest headline.
- MEAN REVERSION
- — The tendency of prices to return to their average over time.
- PAST RETURN
- — What an asset earned before: it does not predict what it will earn next.
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YOUR MINDWhat you focus on when deciding
Under recency bias, the recent eats most of your attention and crowds out calm analysis. An illustrative split of the concept.
If the recent takes 60% of your decision, you are not investing: you are reacting to the last move.
- ANCHORING
- — Fixating on a reference figure that hijacks your judgment.
- PROCESS
- — Deciding by rules and data, not by the emotion of the moment.
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EXAMPLESame bias, different assets
| Broad index | ~600 | → recent calm | Illustrative: after rising, it is assumed to continue |
| Technology | ~500 | → hot streak | Illustrative: chasing what rose most |
| Gold | ~4,600 | → pullback | Illustrative: after falling, it is assumed to continue |
| Long bond | ~90 | → high yields | Illustrative: extrapolating the rate backdrop |
The bias does not care about the asset: it works the same in stocks, gold or bonds. Rounded prices, for illustration only.
- BROAD INDEX
- — A basket representing a whole market, not a single stock.
- ILLUSTRATIVE
- — A teaching example: not a recommendation or a real price.
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RONFYThink in processes, not streaks
The antidote to recency bias is a plan written down before the emotion arrives.
Every weekend, one concept to invest with your head instead of the latest headline.
Follow us · @ronfy_official
Daily briefing · Mon-Fri 16:00 ET
- PLAN
- — Rules set in advance so you do not improvise under pressure.
- DISCIPLINE
- — Following the process even when emotion pushes the other way.