Public might be confident – but what would they know?

Since M&S supremo Stuart Rose remarked that 'people are fed up of being fed up' last month, the phrase has quickly become part of contemporary chatter-currency. And the available market research data does support his view.

In April, MORI's economic optimism index showed that only 27 per cent of UK respondents expected things to get worse over the next year - whereas a year ago, fully 70 per cent felt like that. Similarly, Nationwide's Confidence Monitor rose eight points to hit 50. And over the last two months, stock markets have shown a sustained rally. A wide range of people out there are feeling more upbeat than they were.

But investors should ask themselves two questions: does it matter that folks are fed up of being fed up? And did these research projects talk to the right people?

Most stockbrokers will tell you investment is 'all about confidence'. The trouble is, it isn't. Market recoveries are partly about regaining confidence, and partly about the stark reality of fiscal and economic data. Unsubstantiated confidence causes silly investing and lending.

However fed up people may be, nothing is going to make the facts go away. The FT's manufacturing barometer in April was -2.8, quite a plunge from the 0.4 per cent of February. The CBI's most recent survey showed 64 per cent of manufacturers had seen a drop in orders. The EU's statistical agency Eurostat recorded the highest ever drop (4.2 per cent) in retail sales volumes in March. And it's only the increase in US unemployment that has slowed - the rate itself is still higher at a whopping 8.9 per cent.

Early marketing and advertising research tried to turn consumers into experts and would ask questions like 'do you think this campaign will be a success?' A great deal of political focus group activity does the same thing: 'So how would you rate Gordon Brown's economic performance?' These are both pointless questions, because the interviewees don't know.

It's the same with mass-market confidence indices: they're informative rather than informed opinions. A look at 'inside track' views and behaviour presents a very different picture indeed.

In April, US senior corporates sold $353 million of their own stock in what's supposed to be an emerging bull market. Furthermore, this figure is 8.3 times what they bought. That's another way of saying that, for those in the know, bear sentiment is running at eight times bull.

Those who hope for a swift return to what was normal two years ago are deluded

The other age-old market research lesson from this is 'watch what people do as well as what they say'. Before US Treasury Secretary Timothy Geithner's recent bank 'stress test', both Bank of America and Citicorp respectively said they had 'no further capital requirement' and the 'regulated capital base was strong'. It now emerges that BoA needs $34bn, and Citi £50bn.

In short, there are plenty of people being interviewed out there 'who would say that'. UK and European banks continue to make reassuring noises about their outlooks; but the IMF remains emphatic that we've still only seen 17 per cent of their real liabilities. Another intelligent - and so far very accurate - observer, FT columnist Martin Wolf, said only a fortnight ago, "Those who hope for a swift return to what they thought normal two years ago are deluded."

The first and last job of any good market researcher is to look at people's responses and, using the data, their experience and intuition, sift lies from truth. Stuart Rose is under pressure at M&S and has a vested interest in talking things up. The general public want to stop being fed up because cheerful is better. And bankers have their own agenda.

The confidence expressed in research studies can be self-fulfilling - and consequently helpful. But when the cognoscenti are buying gold, laying people off and selling stock, the chances are that upbeat statements are more confidence trick than truth.