"Animal Spirits": Also known as fear and confidence fairies, these are the little guys on your shoulder in cartoons. Animal spirits describes the phycological factors that drive investors to take action when faced with high volatility in capital markets. If spirits are low, then confidence levels will be low, which will drive a promising market down even though the fundamentals of the market or economy remain strong. Likewise, if spirits are high, confidence will be high among participants in the economy and market prices will soar. For example, the 2008 market was rife with financial innovation, which was initially assumed to a positive outcome until the financial instruments were found to be deceptive and fraudulent. At this point, investor confidence plummeted, a sell-off ensued, and the markets plunged.