THE great British economist John Maynard Keynes coined the term "animal spirits" to describe the impact which human emotion had on decision-making in the financial markets.
When there is literally nothing to explain the wild price swings in the stock market since the onset of the global financial crisis two years ago, animal spirits have been used time and again by market strategists to describe the seemingly bizarre behaviour of investors.
Looking over the e-mails sent to me by investment banks over the weekend, I believe that animal spirits will be at work again soon in the stock market — to propel prices higher.
If sufficient investors believe these glowing reports, we will probably round up the remaining months of the year with another bout of exuberance.
This is despite the weaker-than-expected September job data in the United States released two weeks ago (how many investors actually recall that figure now?) which implied that people in the world's biggest economy were still losing jobs at a horrendous rate and that the recovery, if anything, would be patchy and difficult.
The brokerage reports that I have seen are unanimous in believing that the worst is over.
Below is just a sample of what I have read so far:
"We think the regional upturn is sustainable and the key issue is not the risk of a double-dip recession but the need for Asian central banks to normalise macro policy through interest rates hikes and currency appreciation." – Merrill Lynch.
"The firming economic recovery in China and improved employment outlook have boosted consumer confidence and brought along consumption growth." – Merrill Lynch again.
"We believe we are now at the tail-end of the earnings recession." – Morgan Stanley.
"China discretionary performed well this week as China reported solid sales growth during its Golden week holidays." – Citigroup.