Investor Sentiment

Fine for Me, But Not for Thee

By, 07/25/2008

Story Highlights:

  • A recent study shows a majority of folks around the globe, including Americans, feel awful about their country's current economic state.
  • But when asked about their personal situation, things seem fine and dandy.
  • This disconnect is a telltale indication that prevailing opinion of the economy is far worse than reality.
  • Such disconnect between perception and reality is a longer-term bullish sign.

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It seems like today, you can't run, you can't hide from bad economic news. It's relentless and endless, and most everyone agrees the past few months have felt pretty bad. It almost goes without saying, if you instead see positive fundamentals despite the highly-touted negatives, you're in the minority.

Just how bad does everyone feel? According to a recent report by the Pew Research Center, roughly 77% of Americans believe the economy is, to put it mildly, up a creek without a paddle. And it's not just Americans who feel bad. Roughly 75% of countries surveyed by Pew show more folks are pessimistic than optimistic about their country's economy. Of course, the fact folks are overwhelmingly pessimistic about the broad economy isn't news.

Here's the interesting part: When asked about their personal economic situation, 71% of Americans say they feel good about it. Strange, isn't it? Why do so many Americans feel fine about their personal situation, but are convinced everyone else is suffering? Twelve months of pervasive negative headlines probably don't help the dour view. If you're constantly told the economy is bad by "experts," it's easy to be believe things are bad for everyone else, even if your personal situation is fine.

While surveys aren't perfect, it's pretty clear Americans feel the economy is in worse shape than it really is. But if things were really as bad as many purport, we probably wouldn't see such a large percentage of Americans feeling good about their personal situations.

This phenomenon isn't confined to America. Other Western nations like the UK, Spain, and France sport a similar disconnect between feelings about personal economics and macroeconomic perceptions. According to Pew, "views about national and personal economic circumstances do not always correspond, especially in wealthier Western nations, where people tend to rate their personal situations more positively than their nation's."

In defense of gloomy perceptions, there are problem areas in the economy—and they're easy to identify with. Everyone uses gas and eats food—and prices for these goods are high. Many Americans own homes and house prices are dropping across the country. It's easy to see why folks are upset—even panicky.

But the survey teaches a good lesson to long-term investors trying to sort through the muck and mire. The economy isn't perfect—it never is. But it's surely better off than most believe. The fact that US GDP continues to come in positive and ahead of gloomy expectations should provide a clue that the end isn't nigh. And as we've stated in this space before, when the economy performs better than expected, especially when folks don't expect it to do well, it can be a bullish force for stocks. The economy certainly seems off its gangbusters pace from a year or two ago, but, though far from perfect, it's not the perfect storm many believe either.

*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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