MICHEL PIREU: Sentiment runs the full cycle from optimism to desperation and then relief
Investors’ attitudes can be broken down to 14 emotions
Markets have repetitive cycles primarily governed by sentiment — investors’ attitudes — that begin and end in optimism and in between pass from euphoria to desperation in a progression that can be broken down to 14 emotions. Optimism. It all starts with a positive outlook. As the saying goes, what a man wishes he will believe. “If you could accurately assess the odds against you — whether those odds took the shape of a hunting expedition, a one-on-one fight or the job market for philosophy majors — you would probably turn away from the struggle more often than not,” says David McRaney in his book You Are Now Less Dumb. “There is always plenty of evidence that the odds are not in your favour, enough to deter you from trying just about everything in life. Luckily for you, most of the time you have no idea what you are getting into and you greatly overestimate your chances for success. It makes sense that primates like you would have evolved a fondness for delusions of grandeur. That’s...
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