Most investors and some firms are upbeat about the world economy

ACCORDING TOOECDS&PTD the theory of cognitive dissonance it is stressful to dwell on contradictions. Pity, then, anyone trying to reconcile the miserable mood of many economic forecasters with booming stockmarkets and the increasingly bullish mood in many boardrooms. This week the , a club of mostly rich countries, predicted “dire and long-lasting consequences” in the rich world from the recessions caused by the covid-19 pandemic. As it did so, the 500 index of American shares was almost back to its level at the start of the year, when to most people “corona” still meant something to be drunk with a slice of lime. For a while the strength of America’s stockmarket, which recently enjoyed its biggest 50-day rally in history, looked like a global exception. But since the end of April European and Japanese markets have outperformed even a jubilant Wall Street.To some this is a clear sign of spreading irrational exuberance. Shares, it is argued, have been pumped to unsustainable highs by monetary and fiscal stimulus, and, perhaps, by a wave of speculation by idle workers who have been punting on the stockmarket with their stimulus cheques ( Ameritrade, a retail broker, says trading activity is four times the level of a year ago). In fact, investors have not lost their minds. A stream of positive corporate and economic data provides some grounds for optimism. The trouble is that it would not take much bad news—whether about the withdrawal of stimulus or the pandemic—to throw the rally into reverse.