Social mood motivates social actions, not the other way around.
Social mood is endogenously (internally) regulated, it is not prompted by outside forces.
The recent action of world stock markets shows this to be the case. The change in mood occurred before the imposition of steel and aluminum tariffs, now heralded as causing the rapid decline in stock markets.
The Dow Industrials peaked Friday, Jan. 26 closing at 26,616.71. The DJIA then collapsed in a three steps down, two steps back fashion closing Feb. 9 at 24,190 after hitting 23,360 intra-day.
Trump did not announce the tariffs until Thursday, March 1. That was the third-straight day of decline. The move last week shed another 1,500 DJIA points.
I was quoted in one newspaper as observing that when the president touts the stock market in the State of the Union message, it is a sell not a buy signal. Realizing that maximum mood occurs at the end of a mania, it was fairly easy to see the set up for a reversal. In addition the markets had achieved a straight up parabolic status, which is usually resolved with a collapse.
It is said that markets exhibit three moods, hope, fear and greed. The markets reached 26,616 on greed. Now the markets are hoping calmer heads will prevail and a trade war will be averted. Oh yes, the president says trade wars are easy to win. I am not aware of a single U.S. College of Business that teaches such nonsense.
The newspaper reports are plain to see. It is the job of the socioeconomist to report the changes in mood, which ultimately drive markets.
Here are excerpts from the Monday, March 5 Wall Street Journal.
“Manufacturing executives who make beer cans, cars, and refrigerators, warn of price surges, shortages, and retaliatory trade barriers on US exports if the US plan is implemented.”
“China Could Soon Have a Truly Competitive Car Maker”
“Steel tariffs could also hit energy producers and hurt the goal of US energy independence, industry groups say.”
“China is building a new Silk Road as part of its Belt and Road Initiative through 68 countries.”
The point here is that China is being inclusive building more routes for trade with itself. The United States is being exclusionary building walls to trade.
Mary O’Grady warns “It will alienate Canada, which may look for new suppliers as Mexico has since Trump threatens to withdraw from NAFTA.”
The editorial board makes this observation. “The Voestalpine AG steel Plant in Austria only needs 14 employees to produce 500,000 tons of steel wire a year. In the 1960 this would have required a thousand workers. “The point being that technology has reduced the need for human involvement.
“Any sustained trade conflict threatens the synchronized global economic expansion.”
“President Trump revives threats to place tariffs on imported European autos.”
The examples are every where to observe. The optimistic mood has at least moved from greed to hope.
The bottom line is that the optimistic mood, which drove markets to new all time highs, has now abated. Change is in the air.