Recency bias is one who believes that recent trends will continue even if there is no clear cut evidence to support the conclusion that the recent trend will continue. For example, in the stock market, in a year from now the market could be 30% higher or 30% lower and either would be a reasonable projection or prediction in the prevailing or current environment of available data.
Furthermore, the U.S. Federal Reserve Bank today practices recency bias portraying confidence about the immediate and long term future of the U.S. economy in the face zero interest rates knowing that someday interest rates must rise which may or may not jeopardize parts of or the whole U.S. economy while secretly praying they are not charting a course toward economic disaster in the U.S. economy and worldwide stock market. However, no one knows for sure because we are in uncharted, unprecedented territory since the Federal Reserve Bank has, from 2008 to 2014, printed more U.S. dollars and guaranteed pay back of interest on more U.S. debt than at any other time in U.S. history.
SUPPLEMENTAL SOURCE: DRACH MARKET REPORT 1/3/15