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U.S. analyst Nick Maggiulli recently published a useful column detailing investors’ susceptibility to confirmation bias, which is another name for our tendency to see what we want, or expect, to see in markets. Mr. Maggiulli recounted a psychological experiment to prove his point, where two groups of students watched the same video of a political protest,

“One group was told that the protest was against legalized abortion and the other group was told that it was against the ban on openly gay/lesbian soldiers from serving in the military. After collecting information about the students’ political beliefs, [the study] found that the students’ reactions to the video were highly correlated with their pre-existing views… For example, those participants that were against legalized abortion, “saw” the protest as a peaceful expression of dissent, while those that were for legalized abortion “saw” the protest as an act of physical intimidation.”

The author then applied the idea to investing by admonishing himself for reacting angrily to market views that contradicted his own, denying himself the opportunity to challenge his position.

Mr. Maggiulli’s antidote to confirmation bias is to ‘Keep your identity small’ because ’When you identify with an idea you make it harder to argue about the idea, because you instinctually feel like any disagreement is an attack against YOU and not the idea… Think of your beliefs like clothing, not tattoos.”

My portfolio has been punished in the past for not following this advice, particularly in cases when I thought I was being clever. In the case of General Electric, I was saved from big losses only by the diligence of my financial adviser. I had (completely incorrectly) ascertained that the stock was destined for success because the company had dominant market positions in all my favourite secular growth themes like health care and energy infrastructure. (In reality, the company was suffering from declining balance sheet quality, bad technical momentum, and a host of management and profitability issues.)

It took a lot to get me to sell GE because it was my idea, a reflection of my market knowledge, and its success was personal.

I will remember Mr. Maggiulli’s advice to view market opinions like clothing because it encompasses the ideas of popularity and fashion. In the future, let’s hope it stops me from getting any more stock ticker tattoos.

-- Scott Barlow, Globe and Mail market strategist

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Stocks to ponder

Wesdome Gold Mines Ltd. (WDO-T) Year-to-date, the share price is up 46 per cent and the Street has bullish expectations. The company has a several near-term catalysts that could further lift the share price in the upcoming months. Jennifer Dowty profiles the stock.

National Beverage Co. (FIZZ-Q) Bubbles pop. It’s true about sparkling water. It’s true about investing. And it’s likely true about investing in sparkling water. That is, if you choose to buy the shares of National Beverage Co. of Fort Lauderdale, Fla., the owner of LaCroix sparkling water. LaCroix’s roll-out in Canada is an ongoing success apparently with the beverage appearing in more stores and more refrigerators. Consumers who have been told to “invest in what you know,” and love the sugar-free substitute for soft drinks, may be tempted to get in on LaCroix’s parent. But the more you know about National Beverage, the less you may want to partake in the shares, says David Milstead.

Second-half 2018 market outlook

Six signals for knowing when to run from this near-record long bull market

The global trade system may be stumbling toward collapse. The stock market, though, appears remarkably unconcerned. During the first half of the year, North American stocks managed to shrug off trade-war rumblings and tirades from U.S. President Donald Trump. In Canada, the S&P/TSX composite finished June at essentially the same level it started the year. In the United States, the S&P 500 advanced modestly, gaining 6.2 per cent in Canadian dollar terms. The question for the second half is whether stocks can continue to remain impervious to the new reality of rising tariffs. The answer hinges on whether economics, history or politics will dominate investors’ minds. Ian McGugan reports. (For subscribers)

What to expect from the TSX, S&P 500, oil, loonie and bonds

David Berman takes stock of where things stand at mid-year, and looks ahead to what the next six months may bring, including the consensus call for these markets. (For subscribers)

Five leading market strategists reveal their most importance advice

David Rosenberg, Eric Lascelles, Brian Belski, Stephen Takacsy and Kim Shannon provide their insights for investors as the second half of the year gets underway. (For subscribers)

Five things you can do to prepare for a stock market correction

The well-built investment portfolio is always prepared for a stock-market correction. That’s the point of diversification and ongoing portfolio maintenance. You don’t have to make adjustments on the fly because you’re set for all market conditions. If you’re worried about a stock market correction and are unsure about how ready you are, check out these five suggestions courtesy of Rob Carrick. (For subscribers)

What trade war? Strategists get more bullish on Canadian stocks

What’s a little trade skirmish between friends? Not much, according to strategists who say a tit-for-tat tariff stand-off with the U.S. will be overshadowed by a rebound in energy shares that will drive Canadian stocks 4.9 per cent higher by year end. (For everyone)

Others (For everyone)

Six tips for knowing when the stock you own is about to cut its dividend

Funds exit copper as global storm clouds gather

Bank of America sees a replay of 1998 in summer pain trades

The Globe’s stars and dogs for the week

Do you have a question for Globe Investor? Send it our way via this form. Questions and answers will be edited for length.

What’s up in the days ahead

There’s always a place for smart macro-driven calls, but the Canadian stocks that performed best in the first half of the year didn’t require prescient insight into oil prices, interest rates, the U.S. dollar or even cannabis legalization. Instead, betting against prevailing wisdom worked far better. David Berman will explain in Wednesday’s Globe Investor.

Click here to see the Globe Investor earnings and economic news calendar.

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Compiled by Darcy Keith

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