With the Dow Jones industrials zeroing in on 10,000, investors might seem to possess an unshakable optimism. After all, economic fundamentals still look strong. When asked, people say they themselves aren't scared. But they're worried that others will panic and yank money from banks and dump their stock portfolios. And it's not just CNBC-watching average investors who are rattled.
Some trepidation is understandable.
Americans are being bombarded with alarming messages about what could go wrong. Groups from the American Red Cross to the Christian Coalition are encouraging people to take precautions in case the power fails, food supplies are disrupted, and the banks shut down. Those concerns, however unfounded, could translate into shaky financial markets. Given an overall uncertain future, people focus on whatever is concrete. As a result, investors may inflate the importance of the end of the millennium, says Shiller.