Lexicon Financial Group Weekly Update — October 7, 2026
“Traders and investors are humans, full of emotions, behavior biases, and good and bad past experiences. We don’t have much control over psychological shortcomings, and we routinely make decisions contaminated with our emotions and biases.”
ISSUE 248
Looking Around
If you regularly read our weekly updates, you know that one topic we often discuss is the behavioural aspect of investment management.
Research shows that investors generally face two significant types of bias:
Emotional biases that typically involve spontaneous decisions driven by personal feelings and psychological influences.
Cognitive biases which involve decisions based on established beliefs or assumptions that may not be accurate.
Bias does more than distort fact-based decision-making; it can also cause us to dismiss evidence that challenges our existing views. Because bias can be both conscious and unconscious, we may not even realize how strongly it influences our decisions. (1)
Importantly, biases are not limited to investing. They are an inherent part of human decision-making. Daniel Kahneman, a psychologist rather than an economist, won the Nobel Prize in Economics for his pioneering work in behavioural economics. Research has shown, for example, that judges tend to issue harsher rulings before lunch and more lenient ones afterward. Likewise, physicians can make errors when they rely too heavily on past experience while overlooking new information. Even highly intelligent decision-makers often fail to act rationally despite having credible evidence available to them. In this sense, bias can prevent us from seeing what is actually in front of us. (2)
According to a Morningstar study examining the financial impact of behavioural biases, nearly all respondents displayed signs of multiple investor biases, with a remarkable 98 per cent exhibiting at least one. The study found that individuals with high levels of overconfidence were twice as likely to experience financial difficulties, including lower savings, higher debt levels, and poorer credit scores. Conversely, investors with lower levels of bias were:
7.5 times more likely to plan ahead for the future.
2.4 times more likely to pay their bills on time; and
2.8 times more likely to spend less than they earned.
One of the most effective ways to mitigate bias is simply to become aware of it. If you would like to learn more about the different types of investor biases, explore the resources in the "Looking to Learn?" section of this week's update. As portfolio managers, we create a written Investment Policy Statement (IPS) for every client. This document serves as a disciplined framework for decision-making and helps reduce the influence of bias throughout the investment process.
While bias can never be eliminated entirely, it can be recognized, understood, and managed.
Read and Watch
Want deeper insight into topics in your Weekly Update? Then, read and/or right click:
TSX rises nearly 350 points amid investor focus on economic resilience
Stocks under the Trump administration: What is driving markets in 2026?
Eurozone Inflation Hits 3.8%, Adding Pressure on the ECB to Raise Interest Rates Again
Nikkei Falls as Bond Yields, Oil and U.S. Jobs Data Weigh on Tokyo
China unveils rate cut, mortgage subsidies to spur growth
Looking Back
Canada's main stock index rallied on Friday, led by materials and industrial shares, after weaker-than-expected United States (U.S.) jobs data bolstered expectations that the Federal Reserve (Fed) would leave interest rates on hold this month. The Toronto Stock Exchange's S&P/TSX Composite Index (TSX) ended up 347.89 points, or 0.99 per cent on Friday, which snapped a four-day slide that had led to the lowest closing level in 10 weeks on Thursday. For the week, the TSX was down 0.8 per cent as bond yields climbed globally, including a 24-year high for the yield on the U.S. 10-year note. (4)
Major U.S. stock indexes finished last week mixed, as investors weighed a weaker-than-expected jobs report and falling expectations for a Fed rate hike against elevated Treasury yields, volatile oil prices, and continuing ongoing uncertainty regarding the U.S.-Iran conflict. The Nasdaq Composite and S&P MidCap 400 Index advanced last week, while the Dow Jones Industrial Average and S&P 500 Index declined.
The pan-European STOXX Europe 600 Index ended last week down 1.14 per cent in local currency terms. European equities were volatile during the week, as elevated oil prices and rising sovereign bond yields appeared to weigh on investors' risk appetite. Stronger-than-expected inflation data reinforced concerns that monetary policy could remain restrictive in the European Union. Other major European stock markets also ended down last week.
Japan’s stock market returns ended mixed last week, with gains concentrated in artificial intelligence (AI)- and semiconductor-related shares, supported by strength in global chip stocks and renewed optimism around demand for AI infrastructure. Broader sentiment, however, was more subdued amid elevated bond yields and expectations for further Bank of Japan tightening due to a Tokyo-area inflation accelerating faster than expected.
China equities pulled back last week, as mainland Chinese stock markets were closed last Thursday and Friday for the Golden Week holiday. Domestic semiconductor names also retreated on worries about intensifying competitive pressures, based on speculation that Beijing may allow companies to buy NVIDIA chips, while reports of potential U.S. restrictions weighed on shares of optical equipment makers. Financials and technology stocks were among the biggest laggards, hurt by rising U.S. bond yields and disappointment over Beijing’s latest stimulus package. Some market participants felt that the measures may not be sufficient to address the economy’s structural imbalances of sluggish domestic demand and growing export reliance. (5)
Understanding Common Types of Bias in Investing, Adam Hayes, Investopedia, February 25, 2026
Overcoming Behavioral Biases: The Importance of Our Proprietary Portfolio Exercises, Christpher M. Dyer, Morgan Stanley Investment Management, March 5, 2026
Who's Influenced by Behavioral Biases? Everyone, Sawari Das, Morningstar, May 25, 2021
TSX pares weekly decline as investors reduce Fed rate hike bets, Darshan Kumar R and Fergal Smith, Reuters, October 2, 2026
U.S. job growth cools as inflation remains persistent, T. Rowe Price, October 2026
The opinions expressed are those of Craig Swistun and not necessarily those of Raymond James Investment Counsel which is a subsidiary of Raymond James Ltd. Statistics and factual data and other information presented are from sources believed to be reliable, but their accuracy cannot be guaranteed. It is furnished on the basis and understanding that Raymond James is to be under no liability whatsoever in respect thereof. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Raymond James advisors are not tax advisors, and we recommend that clients seek independent advice from a professional advisor on tax-related matters.
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Looking to Learn?
If you want to know more about some of the topics we wrote about this week, just click on the links below:
Decoding the Mind Games: Unraveling the Secrets of Five Common Biases
