“Animal Spirits”, a new phrase, or should I say an old phrase that I was not familiar with, began popping up with last fall’s post-election market rally. You may have heard of these spirits in current stock market news.
Wall Street and economists like the use of animal names to describe market trends; names such as “Bull” or “Bear” referring to the stock market status, or “Dove” and “Hawk” referring to policymakers’ tendencies toward rate trends. These animal names, however, have nothing to do with “Animal Spirits” found among investors right now.
Animal Spirits, a term used by economist John Maynard Keynes in his book titled "The General Theory of Employment, Interest and Money", refers to the human emotion, instincts and tendencies that influence one’s behavior, which in turn is measured in terms of consumer confidence. Keynes believed animal spirits were needed to motivate people to create market runs.
“Animal Spirits” is a way to explain why decisions are made even in times of uncertainty. If the “Spirits” are low, then confidence will be low which may drive a promising market down even though fundamentals remain strong. Likewise, if the “Spirits” are high, as after the presidential election, confidence will be boosted among participants and market prices will soar.
Recently, market optimism hit its highest mark since 2000. What remains to be seen is whether the rise in “Animal Spirits” can continue to spur economic activity and the financial markets.
A sound investment and financial plan cannot rely on whims or emotions to succeed. For over 134 years individuals and businesses have relied upon SNB's sound analysis and reasoned strategy to make their investments productive in many different market cycles. If you would like to discuss how our approach can help you be more prepared for the future, please call Security National Bank Wealth Management advisor. We are always willing to help.
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