The markets soared following Election Day, prompting some experts to say"animal spirits" are back." led to new index highs for the S&P 500 and Dow Jones Industrial Average, lifted with the help of certain sectors expected to do well under the president-elect's second term."Animal spirits" is a term first coined by economist John Maynard Keynes and refers to the tendency for human emotion to drive investment gains and losses.
Research has shown dead investors' portfolios tend to outperform, since they are left untouched because they are less likely to be influenced by emotional decisions, such as panic selling or buying.The recent market runup was not prompted by individual investors chasing the market to a meaningful extent, according to Scott Wren, senior global market strategist at Wells Fargo. Individuals, who were split in their election choices, are also divided in their investment outlook, he said.
Instead, it has been professional traders and money managers — who couldn't sit on cash when the S&P 500 index was setting new records every two or three days — who have helped drive the markets higher, he said.