'Animal Spirits' and Business Cycles
Emotions and behavior can affect economic output as much as, if not more than, core economic factors.
This is the second in a series called Behavioral Finance and Macroeconomics. We will explore the effect behavior has on markets and the economy as a whole--and how advisors who understand this relationship can work more effectively with their clients. (Access more articles here.)
It is important for advisors to understand the impact human behavior has on the economy and how economists think about the subject. This can help you explain to your clients what happens to mass psychology during recessions and expansions--and when recessions (or worse) happen, what psychological factors bring the economy and the markets back on track.