Are investor fears justified?

What a strange financial time we live in. On the one hand, we have high unemployment and a sputtering stock market. On the other hand, we have many big companies reporting big earnings. Practically all the big signals point to the major companies having recovered from the economic meltdown. Even the unemployment situation seems to have improved a little bit.

I work for a big company that has its hands in many parts of the economy and this is a very good year. We expect the rest of the year to be great as well. My company has recently reported good news on its earnings -- just as many companies already have. Yet, investors are still fearful of the market. Why is that?

I can think of three possibilities. One, people are still more fearful than they should be. Two, the stock market is still overpriced despite apposite trend earnings. Three, a little blend of one and two. Based upon my calculations from a few posts ago, the stock market is priced about average. So, its not a great deal. However, I do think most people have an unreasonable fear of the market.

I can find a example of unreasonable fear in my company's stock. Despite the facts that my company is making a lot of money, purchasing resources for the future as the discount because of bankruptcies of competitors, and show a lot of orders for the future, the price has floundered. In fact, on the day we reported good earnings, the stock went down! Why? My only response is that people are overly fearful. My company is so large that I think the same principles apply to the general market.

I also suspect that the employment market is reflected well by my company. During the downturn, we laid off over 10% of the company! We've been slowly hiring back but are not at the employment point that we were before. However, in the last six months there has been a significant increase in the amount of new-hires. I expect to see more new faces around in the next 6 months. I suspect that when the employment situation gains more significant traction then investor confidence will significantly increase.

How does any of this change my investing behavior? It does not. I'm not going to go out and trade my conservative investments for stocks and I'm not going to rush out and sell my stocks for conservative investments. I'm not afraid and I sleep well at night.

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