Yes, We’re Confident, but Who Knows Why
There have been several indicators that the markets are on a road to recovery, with the ever important housing market growing and the stock market hitting new highs. But some make the case that this turning point is merely a side effect of confidence. New York Times writer Robert J. Schiller has performed tests that try to measure the most difficult aspect of the markets, the people and their emotions. He has been gathering opinions from investors as well, through surveys, and the current amount of confidence is quite high. “Using the six-month moving average ended in February, it was running at 72 percent for institutional investors and 62 percent for individuals.” To put that number in perspective, both were at 80 percent before the market crashed in 2007.
Confidence means nothing when it can evaporate so quickly. I feel that the community has become jaded; tired of markets receding every time a potential crisis arises. From the fiscal cliff and sequestration, to the collapse of the whole European Union, investors simply don’t believe it can happen anymore, or that some issues won’t even matter. When something does occur, however, it could very well create another traumatic collapse of the economy as the confidence slips between our fingers.