It’s important to recognize that there are many people in the financial industry who will never change their minds regardless of the facts. When you realize that, you become more skeptical of every opinion, which is a great skill to hone. For example, mutual fund managers are always optimistic about the long term because they want investors’ money. It’s possible to be optimistic about your own performance and pessimistic about the market, but the industry likes to keep it simple by remaining optimistic to avoid scaring people out of the market. If many managers were warning of a crash, some investors would pull out of everything instead of going with a manager who is hedged. Hedging isn’t a concept understood by some non-professionals.

On the bearish side, there are is an industry dedicated to selling doom and gloom to reinforce people’s biases. Some of the bears become addicted to reading dire stories which is why this industry has survived without being right in years. Just because stocks have done well recently, doesn’t mean doom is around the corner; more objective research needs to be done. The final group of individuals who are entrenched in beliefs are those who don’t want to change because they are emotionally attached to their positions. It’s important to differentiate between healthy skepticism and constantly changing your mind. It’s a subtle point that takes a lot of work, but getting it right makes you a skilled investor. You must be open to different perspectives without necessarily changing your mind every time you hear a new point. The key is to figure out which point will move markets and avoid acting on ‘noise’ which is interesting, but not actionable information.

The chart below is one example of bullish earnings arguments which are illogical. The point is that it is biased to only look at the positive perspective when negative events occur. Bulls ignored housing earnings, GAAP earnings, and went back and forth on energy depending on if it did well. The point isn’t that you must always be bearish when these silly arguments are explained. The nuanced point is to know what you own and why you own it. You should’ve bought stocks in 2014-2016 if you were bullish on total earnings, not because energy earnings don’t matter. Every sector matters because, at the most, it can cause a cascading effect on the economy like housing did and, at the least, it can weaken total earnings like energy did.