Here we go again. A wave of uneven economic new items about housing, employment and equities have made some entrepreneurs queasy. Should companies shift their forecasts based on the latest economic headlines?

To get caught up in the conventional wisdom and buzz offered by analysts and the news media can be a trap. Emotions govern our thinking on many levels.  The electronic age has brought new volatility to markets, and has created a fertile environment for both arbitrage by institutional types, and droves of individual investors moving in unison to support some conventional wisdom about energy prices, gold, or the stock price of Intel or Apple.

It is as if our economy is a large rubber band susceptible to large swings based in part on the national mood.  Our current reality is that if the economy is growing at a 4% clip it is perceived to be expanding, but at 2% we feel as though it is sluggish.

Our thinking often crystallizes around “the economic cycle” which cannot be evaluated independently. The economy is merely a component of a spider web of stressors that can be deeply affected by social, economic, cultural, political and military events.

U.S. history is riddled with periods of growth and decline steered by such mood swings.  After the panic and fear of the Great Depression, and World War II, the United States settled into a period of profound optimism and growth. They were happy days in America, as the Wonder Bread/Leave it to Beaver era reigned in conformity and stability.

With scant warning, the JFK assassination inflicted a deep wound, a precursor to two decades of volatility and violence, as our nation slid into a deep funk. It took twenty years for the pendulum to swing back again. On the heels of the U.S. hockey team’s Gold Medal in the 1980 Olympics, Ronald Reagan proclaimed “it was morning in America” during his State of the Union in 1984 alluding to the nation’s restored optimism.1

The Dow Jones Industrial Average shot up by a factor of eight times from 1982 to 2000 only to lose half its value between 2000 and 2008 as the market crashed again.2  A similar bubble occurred in oil futures, with oil reaching $145 per barrel in July in 2008, only to fall within a year to trade in the $50 range. Clearly, bubbles represent investors overreacting to markets and accepting a new perception of normalcy and a different tolerance for risk. The entrepreneur must be conscious of this tendency, and make measured decisions based on facts.

While I am not one to offer economic forecasts or investment advice, I believe overreacting to current news items could be limiting. While many sectors of the economy are indeed sluggish, others have great upside and are worthy of investment.

[1] The Fourth Turning by William Stauss and Neil Howe -  Broadway Books

[2] Animal Spirits by George Akerlof and Robert Shiller- Princeton University Press 2009