Psychology of a Market Cycle

This is a guest post by Wall St. Cheat Sheet’s Damien Hoffman.

There is a lot of doomsday talk these days. Rightfully so. There are a lot of illnesses in economy.

However, unlike the credit freeze and market freefall in 2008, governments are actively backstopping key markets (e.g., Mortgage Backed Securities) while ensuring a more liquid credit industry. Moreover, corporations are starting to increase topline revenues after rapidly cutting costs since the recession began.

Are we stuck in a psychological inertia negativity classically representative of a mature recession? Is the sovereign debt crisis about to ignite another dip into Hades? Or, are we at the top of the first inning of a bland yet real recovery?

In the chart below “Psychology of a Market Cycle“, are we at the stage of disbelief? Are we still in the anger phase? Or, are we somewhere else entirely?

Let your opinion be heard in the comments below…