Psychology in a Lab Coat: Notes from a Noisy December Week

Written By Connor

Hello everyone, I hope you are all doing well, and getting ready for the excitement, hustle, and bustle of the holiday season. For those like me who struggle during the holiday season, know that you are not alone, and if you ever need someone to talk to, please reach out. I am always here for you. I would rather sit down and have a conversation with you than have you sit in solitude.

This week’s post covers market moves, macro signals, geopolitics, and the full “why is my watchlist sweating?” package. You know that feeling when you graduate and think, “Finally, I’ll never use math again”? Yeah… that’s cute.

Because math didn’t leave your life, it just changed outfits. Suddenly, it’s budgeting, interest rates, calories, commute times, fantasy football projections, and that suspiciously common moment when you can’t afford something, but you can justify it. So, bad news: math didn’t disappear. It just put on a hoodie and started hanging out everywhere.

Markets are like that, too. Most weeks, they feel like pure arithmetic: variables shift, correlations behave, and you can almost reduce the whole story to a chart and one clean summary sentence. This week, tried to look like that. But underneath? It was emotions in a lab coat—psychology cosplaying as calculus. Confidence dressed up as conviction. Uncertainty disguised as “data.” Narratives spreading faster than anyone’s risk model could refresh.

In other words, the tape wasn’t just pricing information this week. It was pricing people, their fears, their hope for relief, their need for certainty, and their tendency to follow the crowd the moment the crowd looks like it knows something.

What happened this week?

Early in the week, investors saw the U.S. equity market attempt to rebound from recent volatility in the AI and mega-cap sectors. The U.S. inflation print (CPI – November 2025) finally arrived and came in softer than originally feared it would be, but I, along with most other investors and economists, am questioning the validity of the data quality given the prolonged government shutdown. Multiple central banks across the world came out with mixed signals. Oil prices are acting like they are riding a rollercoaster at Six Flags; they are constantly being whipped around between the forecasts of future surplus that is occurring in the world, as well as the geopolitical firestorm that we are all watching firsthand. Finally, the start of the weekend reminded everyone that tail risks do not take holidays – how rude am I, right?

Living in real time, most people feel as if the week did not feel like a clean slate. It honestly felt as if you were watching a crowd of people react to shadows, then reacting once again once it sees its own reaction. This loop is where behavioral finance stops being an academic interest and becomes an everyday tool that we must use.

We must be mindful of this, but I also want to take it a step further with one more layer: the tape we see is never just the “tape.” What I mean is that beneath every “macroeconomic surprise” or “risk-on rally,” there are not only households in this country, but also people around the world—workers, borrowers, dreamers, immigrants, analysts, retirees, business owners, lay people, service members, and civil servants. Everyone is simply trying to get by, just as you are, making decisions under pressure with incomplete information. If we lose sight of this, the market becomes like a video game or a casino, where we stop caring about the second- and third-order effects. However, if we keep this in mind and remember it, the market reveals its true nature: a social system made up of interconnected human lives.

I want to consistently maintain a reflective approach like my other blog posts, assessing the marketplace through a behavioral lens while remaining cautious of narratives that evoke excessive certainty.

Week at a glance: analyzing the so-called “tape” as well as the tension underneath

Monday (Dec. 15): We see that the markets began to plateau and steady after a tumultuous AI-led wobble. This led certain investors to focus on and gauge the reliability of the macroeconomic signals they were receiving.

Tuesday (Dec. 16): Nasdaq came out and re-published their push towards the idea of “extended trading hours.” What this means is that they are trying to get to where the market is “always-on.” Later, I will explain my personal opinions and why this is a bad idea.

Wednesday (Dec. 17): Due to the current U.S. Military operations in the Caribbean around Venezuela, Oil prices surged, while its sister precious metal commodities stayed relatively buoyant (for now). Investors know that this is a “safe-haven” reflex that coexists with the rate-expectation narratives that are at play.

Thursday (Dec. 18): The November inflation print (CPI) came out and was softer than the consensus’ best estimates. However, the trade-off with this is that the data that was released was not “fully” clean, due to the data collection gaps that were due to the U.S. Government shutdown. Another event that occurred on Thursday was that the Bank of England decided to cut its rates down to 3.75% after a divided vote that very much resembled its U.S. counterpart.

Friday (Dec. 19): U.S. equities rose, driven by a tech rebound and triple-witching effects that amplified market movements.

Saturday (Dec. 20): We can see that the “weekend headline effect” was in full swing, Lebanon’s ceasefire grappled with the idea of disarmament and security actions south of the Litani River, while Ukraine continued on its journey to wade through the muddy waters of diplomatic engagements with the U.S.

1. AI anxiety and the speed of narrative contagion

Let’s take a step back and analyze the bigger picture of what is at play this week. The markets opened with an emotional aftertaste, being that the AI/mega-cap selloff had not merely moved prices as one would have hoped; it had challenged a belief system. From my perspective, this is part of the equation that never gets priced explicitly: when the thematic environment becomes crowded, price stops being a number and becomes a referendum. It becomes a vote on whether the future you were imagining is still “true,” or is it a paradoxical universe.

It is important to understand that this is why “capex” can flip meanings overnight.

  • In optimism, spending is “vision.”

  • In anxiety, the same spending becomes “recklessness.”

Behaviorally, this is what psychologists would call the herding bias or herd mentality—but not the cartoonish kind where people copy each other mindlessly. It is herding with identity attached. People are not just holding a position; they are holding a story about the future and, sometimes, a story about themselves: being early, being disciplined, being modern, and being right.

I want to be very clear, here is where the people show up time and time again: every time that the market turns a theme into a moral drama, someone experiences it as something more than a portfolio fluctuation. It becomes retirement anxiety. It becomes a university endowment committee, wondering what it can responsibly spend. It becomes an employee with stock-based compensation, watching the value of “future security” swing by the hour. A discipline for weeks like this is brutally simple and surprisingly hard. I am reminded of this almost daily:

Treat every narrative as a hypothesis, not a home.

Know this: Sometimes a selloff is the beginning of a regime shift. Sometimes it is positioning, year-end constraints, or unwinding. The market rarely tells you which one it is immediately, and ultimately, the urge to “know” is precisely where mistakes can become expensive. Pause, breathe, and approach the problem calmly.

2) The comfort of a clean number—and the danger of an asterisk

You hear across the market all the time that it claims to love accuracy. I would argue that what they often love more is cleanliness. A CPI print that reads “softer than expected” is cognitively satisfying. It gives the tape and investors something to digest. It gives the brain closure. But this week’s CPI carried a quiet discomfort, which has everyone questioning, and that is the number arrived in an environment shaped by shutdown-related disruptions and missingness—exactly the kind of detail that makes a headline feel reassuring while the underlying signal remains noisy.

What this means is that the Consumer Price Index (CPI) data released this week looks straightforward and comforting at first glance, but there’s a catch. The reported number was influenced by the recent shutdown and overall data gaps. This means that important information may be missing or distorted. While the headline figure might seem reassuring, at first glance, those disruptions make it harder to trust the result, because they mask the true underlying trends. So, even though the number offers some relief, it doesn’t necessarily reflect the actual state of inflation, leaving people uncertain and questioning its reliability.

It’s important to recognize that uncertainty can be uncomfortable, so we often use a number to ease that discomfort, even if that number might not tell the whole story.

This is the need for closure dressed up as “analysis.” It often shows up as:

  • anchoring on the headline,

  • skipping the footnotes,

  • and letting relief masquerade as conviction.

Now, let’s zoom in on the human layer that is at play here. Inflation is never just a statistic. It is rent. It is groceries. It is childcare. It is a family deciding whether “one more” holiday expense is worth the stress in January. When inflation data is distorted, it is not simply a technical inconvenience; it is a reminder that the measurement system itself is embedded in governance capacity, institutional functioning, and social stability.

A question worth asking is not “Was CPI good or bad?” but rather:

Did I feel calmer just because a number was printed?

If the answer is yes, then the week gave you a useful signal, just not the one most people think.

3) Central banks as mood regulators, not just rate setters

This was also a week where policy reminded us that global cycles do not move in one synchronized wave. We can see that Europe held steady. The UK eased its rates but did so with internal caution. Conversely, we saw that Japan tightened, pushing against the comforting narrative that “liquidity is uniformly getting easier everywhere.”

If you are U.S.-centric, it is tempting to treat foreign central banks as background scenery. But, as we know in psychology, it does not respect borders. Investors do not merely price cash flows. They price overall comfort: the ability to roll risk, refinance, extend duration, and keep believing tomorrow will resemble today.

Here is my translation for lay people:

  • A cut is not just a cut; it is a mortgage-holder hearing “maybe relief,” while also hearing “we are not sure.”

  • A hike is not just a hike; it is a signal that borrowing costs can stay restrictive longer than crowded trades want to admit.

  • A hold is not just a pause; it is a reminder that the world’s policymakers are managing trade-offs that are fundamentally human: employment versus prices, growth versus stability, short-term pain versus long-term credibility.

When central banks diverge, the market experiences it as “crosscurrents.” However, people experience it as uncertainty about budgets, hiring, and living costs.

4) Oil’s weekly lesson: we price the future, but we feel the present

Oil did what oil often does in psychologically thrilling and charged weeks: it became a battleground for competing time horizons. On one side, we saw the forward-looking narrative of surplus concerns, next-year supply, and the gravitational pull of “math.” On the other side of the equation, entered (everyone’s favorite term) geopolitics, being that of enforcement actions, tanker headlines, and the old truth that fear can move faster than forecasts.

The behavioral move here is quite familiar; we toggle narratives based on whatever headline is freshest.

Going back to my college Psychology 201 course, I learned that this is recency bias. But it has a close cousin that is more dangerous, the illusion of explanatory depth. We overestimate our understanding of a complex system because we can repeat a headline about it.

  • “Oil is up because X.”

  • “Oil is down because Y.”

Both can be partially true. However, neither is a complete explanation of the situation at hand.

Unwrapping the human layer matters here because oil is not just a tradable barrel; it is commuting costs, shipping costs, airline margins, food distribution, heating, and political stability in places where energy revenue is the state’s bloodstream. Even when markets treat geopolitical headlines as “risk premia,” those premia often reflect real vulnerability for real people.

A disciplined framing separates three drivers:

1.     Flows: what changes actual barrels and logistics.

2.     Expectations: what changes forecasts and policy outlooks.

3.     Risk premia: what changes fear, uncertainty, and tail-risk pricing

Markets can move most violently on the third, that is, because fear is immediate, and forecasts are abstract.

5) Triple witching: when market structure turns emotions into volume

For my lay people that read my blog, Triple witching is defined as the quarterly event on the third Friday of March, June, September, and December when three types of financial contracts (stock options, stock index options, and stock index futures) all expire simultaneously, which leads to increased trading volume and volatility in the marketplace. Think of it like this, a city-wide moving day that happens four times a year. Most days of the year, we know that traffic will flow normally, but on this so-called “moving day,” tens of thousands of leases end at the same time, and everyone’s stressed out trying to return keys, pick up new keys, and haul furniture across town all at once. The roads get clogged, tempers run hot, and even a small fender bender can cause a huge backup, not because the city suddenly changed, but because so many deadlines are hitting simultaneously. Triple witching is the market’s version of that. A massive number of investors and traders all have positions that must be closed, renewed, or rolled over because contracts expire that day. That forced, deadline-driven activity can create unusually heavy trading and sharper price swings, sometimes making the market feel more chaotic than the actual news would justify.

This is where behavioral finance becomes humility practice. On days like that, the risk is not only that you misread fundamentals; it is that you misread intensity as information. The chart on the screen feels louder, so you assume the message is more important.

But the overall structure amplifies the psychology of it. It gives anxious brains more movement to react to, and it gives confident brains more “confirmation” to misinterpret.

The human reminder in this is that most individuals do not experience triple witching as “market microstructure.” They experience it as “Why did my account swing so much today?” That gap, between what professionals know and what nonprofessionals feel, is often one of the quietest sources of distrust in markets. If we care about the integrity of the system, we should care about that gap.

6) “Always-on” trading and the myth of emotional endurance

One of the quieter and longer-run stories this week was the continued push toward extended trading hours in U.S. equities, and the drift toward “always-on” markets. We describe it in the language of convenience, which is global access, modernization, and flexibility.

But psychologically, it is an endurance test.

Because the human mind is not built to metabolize price signals continuously. Extended trading hours do not merely extend opportunity; they extend temptation:

  • to check your portfolio compulsively,

  • to respond to late-night headlines as if they are fire alarms,

  • to confuse activity with control,

  • to mistake being informed for being wise.

And the people behind this are not abstract. It is the retail investor looking at a red candle at 11:47 p.m. and thinking they must “do something.” It is the young analyst feeling pressure to be perpetually responsive. It is the trader whose sleep deteriorates while decision quality quietly follows.

If you want to protect your process in an always-on world, you almost have to pre-commit:

Decide in advance what deserves an after-hours response and what is allowed to wait.

The best decisions tend to feel boring because they are made when the nervous system is calm enough to tolerate not acting.

Simply put, I am not in favor.

7) Tokenization: from “crypto as asset” to “crypto as rail.”

The tokenization story this week felt important not only as a speculative headline, but also as a “plumbing” signal that financial markets are inching toward new settlement and ownership rails. Behaviorally, infrastructure stories change posture. They feel slower, sturdier, and more legitimate. It invites institutional language into the picture, being that of settlement, yield, efficiency, and access. This can create a different kind of FOMO, one that is not “I’m going to get rich overnight,” but “I’m going to miss the future architecture.”

That FOMO is socially acceptable, which can make it inherently more dangerous. It is easier to rationalize. Easier to hold through discomfort. Easier to mistake for discipline. The humanized layer here is very subtle but also very real. “Plumbing” is where mistakes become operational, not theoretical. Systems touch compliance teams, custodians, administrators, auditors, and regulators. The story is not only innovation; it is governance, accountability, and who bears the cost when the rails fail.

The antidote is the same as always:

  • define the thesis in plain language,

  • name the adoption bottlenecks (regulation, incentives, operational risk),

  • set conditions for being wrong.

If “tokenization is big” is all you have, you may not have a thesis; you may just have a vibe.

8) The weekend headline effect: geopolitics as a volatility seed

Saturday’s geopolitical developments fit a different pattern that the markets know all too well: the week ends, liquidity thins, and the world delivers information that does not politely arrive at 9:30 a.m. Eastern. Markets have an odd relationship with geopolitics. We call it “priced in” until it isn’t. We treat it as noise because reacting is exhausting and because most headlines do not change cash flows by Monday morning. But geopolitics often functions as a risk premium reservoir. It does not need to change tomorrow’s earnings to change today’s required return.

From a behavioral perspective, this phenomenon is perfectly suited to availability bias, which involves striking language, compelling visuals, and intense moral significance. Our minds perceive emotionally charged events as more likely to occur because they are easier to picture.

In my mind, I focus on the people who are behind this, and it is painfully concrete: civilians in border regions, families living with uncertainty, service members on alert, humanitarian systems strained. A reflective investor does not have to trade every headline, but they should resist the temptation to treat human crises as mere “inputs.”

A grounded stance is not indifference. It is categorization with moral clarity:

  • Does this change base-case economic activity, or primarily tail risk?

  • Does it alter commodity flows, shipping routes, sanctions, or defense spending?

  • Or is it primarily affecting sentiment and volatility?

That is how you stay humane about world events without letting empathy get hijacked into undisciplined trading.

So, what was the real story that occurred this week?

If I had to compress the week into one behavioral sentence, it would be this:

Investors spent the week searching for certainty in a world that kept offering caveats.

A theme trade tried to stabilize after a credibility shock. Macro prints arrived with footnotes. Central banks diverged across regions. Oil flickered between next year’s math and this week’s fear. The weekend reminded everyone that risk does not respect holidays.

In that environment, the edge is rarely a prediction. I truly believe it is emotional differentiation, which is the ability to tell the difference between:

  • a signal and a story,

  • prudence and panic,

  • “I should adjust risk” and “I can’t tolerate discomfort.”

But I would add one more differentiation, one that feels less like finance and more like character, and in my opinion, the most important aspect:

  • numbers and people.

Because the market’s greatest seduction is abstraction. It turns labor into “employment prints,” households into “consumption,” war into “risk premium,” and human worry into “volatility.” Abstraction can be useful for analysis, but it is entirely corrosive when it becomes a way of not feeling responsible.

Remembering the people behind the print is not sentimentality. It is a form of realism.

I created a “Humanity First” reflection checklist for this very scenario:

If the tape felt louder than usual this week, here are questions worth journaling:

1.     What headline did I emotionally overweight, and why did it hook me?

2.     Where did I anchor my thoughts: price level, macro expectation, or a “this always happens” belief?

3.     Did I treat a clean-looking number as certainty when the footnotes are really what mattered?

4.     Did the overall market structure amplify my emotions (expirations, thin liquidity, after-hours noise)?

5.     Who is downstream of the thing I’m trading? – I encourage you to think about this section the most.

  • If it’s rates: borrowers, renters, homeowners.

  • If it’s oil: commuters, shipping, households, fragile states.

  • If it’s AI: workers, capex budgets, productivity bets, and the politics of disruption.

6.     If markets were closed for 30 days, what would I wish I had done differently this week?

I truly think the last one is one of my favorites because it slices through the performance theater. It forces attention back to what usually matters most: time horizon, diversification, liquidity, sizing, and the difference between being busy and being disciplined.

And if you can return to those anchors, while still remembering the human lives behind the data, you’re not just investing.

You’re practicing.

Sources:

Connor
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