Socionomics: The Post-Election Outlook

Does anybody imagine that, come Tuesday, it’ll all be over? Would that such were the case, no matter who is elected president.

Conventional forms of analysis and forecasting the major trends in politics, the economy and the markets start with the premise that the outlook depends on who is in power in politics and in the financial system. This is rarely useful, although economists will work like hell to fit data to circumstance to prove their case, while conveniently sweeping their error rates under the rug.

Socionomics, on the other hand, holds that the driving force in matters of uncertainty is society’s unconscious herding instinct. The primordial desire is to survive and thrive and, in uncertainty, the overwhelming influence is how the herd (us) feels over time. A cursory examination of public sentiment over the past 84 years (1932-2016) reveals a series of mood extremes that accompany important turning points–very optimistic at tops, extremely pessimistic at bottoms.

If you will just accept this observation for the moment, I will tell you what the current analysis of America’s situation foretells. Having made a series of swings leading to interim tops in 2000 and 2008, the best case now is that social mood has turned from optimistic extremes to the beginning of a very dark period. Lots of exogenous reasons to point to, until we recognize that the dysfunction in public and corporate governance that besets the country today is the result of the overly optimistic mood that allowed society to complacently let it happen.

Fixing the system is a function of a determined effort to throw the bums out everywhere, that should be apparent. Less obvious is how it is likely to happen. Presidents are not problem solvers. They are gatekeepers during good times, making decisions that reflect the mood of largess, and recipients of the blame when the economy and the markets fall.

From the perspective of the Elliott Wave Principle, the stock market is within a few points and a couple of months of a top so major that, after it rolls over, no one reading this is likely to see the Dow Jones Industrial Average at 18,000 again in their remaining life.

A bear market will surprise few readers, given the steady weakening of the underlying economy: 90% of the new job creation in the last four years has been for part time jobs at minimum wage. Almost every new job of this kind is going to a worker who already has one or more jobs and must work multiple gigs just to pay rent. It sucks, frankly.

What may be a surprise is the projected form of the bear market: a series of huge, multi-year swings resembling a tiger viciously swinging the goat in his jaws back and forth to hasten the end of its life by ripping it apart.

If we make a top before yearend, stocks should be in a relentless fall for 4-5 years, then rise in an incredible rally for a couple of years to somewhere short of the current high, only to fall back again and make new lows. The process will likely repeat a couple of times, finally bottoming 10-12 years from now, making a final low well below 574, the 1974 low in the Dow. After that, a new bull market will begin with social mood totally exhausted, and totally fearful of the future. It will be a terrific time for my grandchildren to invest and start businesses.

Socionomics posits that this will happen no matter who wins the election on Tuesday. Further, in 2020, the incumbent will lose in a landslide if he/she has not already been impeached. So, don’t feel bad if you didn’t pick the winner.

It won’t make a damn bit of difference.

Cheers,

Rod

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