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Put on a Happy Face
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The U.S. stock market had a four-day rally last week, perhaps suggesting a glowing ember that could fuel a longer recovery. The market ended the week midway between 7000 and 7500 points, so we still have a long climb to regain the averages of last September (then around 1100 points), and still further to reach the averages of a year ago (1200 points and better).


I must admit, however, that I’m sometimes baffled by the rationale behind the ups and downs of the market. Sometimes it seems like investors behave like a massive school of fish, reflecting bright sunlight off silvery bodies as they zip through the water. Then all of a sudden, the mass of fish changes direction, possibly because one fish in the lead detected a shadow that might have been a larger fish or other possible threat to the rest of the school. On some occasions, investors seem more inclined to mimic lemmings dashing over a precipitous cliff.


Often the ups and downs of the market seem to be the result of momentary perception (and sometimes short-sighted perception) rather than a rational examination of long-term value. And sometimes executives seem to cater to those perceptions, making decisions to influence short-term performance, which might or might not be good for the long-term well-being of the company.


I’ve generally believed that perception and attitude do influence performance. Certainly enough books and articles have been written promoting the power of positive thinking, etc. Recent research has suggested that persons who have a positive/optimistic attitude toward life likewise earn more than those whose attitudes are less cheery. Studies also show that, in times of stress (as when people are trying to protect their jobs), individuals become short-sighted, more defensive, and more focused on just doing their job. Individuals who keep a positive attitude essentially feel less threatened by the situation and are better able to take a broader view of the problem, process information, and manage more effectively.


As former U.S. President Harry Truman observed, “A pessimist is one who makes difficulties of his opportunities, and an optimist is one who makes opportunities of his difficulties.”


Attitude alone won’t bring about economic recovery, but it might help for Wall Street to shift its gaze to Broadway and consider a few lines from an old show tune:


 “Gray skies are going to clear up… Put on a happy face…”



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