Markets: Happy days

Positive thinking is a powerful force, even when it doesn’t make much sense. That is one explanation for the mounting exuberance in financial markets. It’s not exactly 1996, when Alan Greenspan, the then chairman of the US Federal Reserve, warned of “irrational exuberance”. But there is an uncanny similarity in investors’ willingness to look on the bright side. Not all of today’s exuberance is irrational. The narrowing of credit spreads, to levels before the collapse of Lehman Brothers, can be...