 By Mark Galasiewski | Excerpted from the December 2010 Socionomist
Originally published under the title “Mood in the Middle East: A Historical Perspective” |
[Ed: Our studies show that the stock market is a kind of barometer of social mood and a leading indicator of a whole range of social trends. Inclusionist social developments, for example, tend to cluster in and follow periods of rising stock prices, and exclusionist events tend to erupt only once prices have declined significantly. In this article, Mark Galasiewski – editor of our publication Asian-Pacific Financial Forecast – illustrates this relationship using contemporary historical examples from the Middle East.]
The above chart shows major social events in the Middle East in conjunction with the S&P 500, the Tel Aviv 100 and the Amman General stock price indexes. These stock indexes reflect the social moods in the United States, Israel and the Arab world, respectively.
Inclusionist events are displayed above the price lines, and exclusionist events below them. As you can see, the events generally express the previously rising or falling trends in social mood for each society. Socionomics Institute founder Robert Prechter calls this the socionomic hypothesis.
For example, notice the timing of the start of the Gaza War, which erupted in late 2008 after declines of more than 50% in both the Israeli and the Jordanian indexes. Such behavior makes sense from the perspective of trends in social mood. When mood trends toward the negative, it shows up immediately in falling stock prices. Then, as fear and anger strain weak relationships, conflicts eventually erupt. The opposite dynamic is at work when the social mood is rising or near peaks. For example, just three years before the Gaza conflict, in the middle of the 2003-2007 rally in the Tel Aviv 100, Israel’s goodwill toward the Palestinians rose to such a high level that the government voluntarily decided to dismantle Jewish settlements in Gaza and to withdraw its forces from the territory.
When mood is positive in one society and negative in another, the results are also compatible with the socionomic hypothesis. For example, long periods of positive-trending social mood in both Israeli and Arab societies paved the way for the Oslo Accords in 1993. In July 2000, one month from the end of a five-and-a-half-year bull market in the Tel Aviv 100, the leaders of Israel and Palestine held a similar summit at Camp David in the United States. But, this time, the Arab index was near the end of a two-year bear market (the low end of an eight-year trading range), and the two sides walked away without shaking hands. …
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In the remainder of this three-page article, Mark Galasiewski charts 13 major Israeli actions since 1948, as well as each of the post-2005 violent events listed on Wikipedia’s “Arab-Israeli Conflict” page. You’ll be amazed to see how closely social mood and these events align.
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Most economists, historians and sociologists
presume that events determine society’s mood. But socionomics hypothesizes
the opposite: that social mood regulates the character of social events. The
events of history—such as investment booms and busts, political events,
macroeconomic trends and even peace and war—are the products of a naturally
occurring pattern of social-mood fluctuation. Such events, therefore, are not
randomly distributed, as is commonly believed, but are in fact probabilistically
predictable. Socionomics also posits that the stock market is the best available
meter of a society’s aggregate mood, that news is irrelevant to social
mood, and that financial and economic decision-making are fundamentally different
in that financial decisions are motivated by the herding impulse while economic
choices are guided by supply and demand. For more information about socionomic
theory, see (1) the text, The
Wave Principle of Human Social Behavior © 1999, by Robert Prechter;
(2) the introductory documentary History's
Hidden Engine; (3) the video Toward
a New Science of Social Prediction, Prechter’s 2004 speech before
the London School of Economics in which he presents evidence to support his
socionomic hypothesis; and (4) the Socionomics Institute’s website, www.socionomics.net.
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The Socionomist enables you to see trend-shaping waves of social mood, as reflected by the stock market — and capitalize on them. The June issue looks at phases of social mood and features a “Research Roundup,” which highlights five academic studies that shine a light on important aspects of socionomic theory. Mood Riffs topics include “quiet luxury,” loneliness, the Writers Guild strike and efforts by countries to trade in currencies other than the U.S. dollar. Read the June issue when you become a Socionomics Premier Member.
