A look at history shows that when markets go haywire people do some strange things to try to cope. The mass psychology of an entire country is intricately connected with the state of the markets. We saw a small sample of this in the panic that accompanied the market melt down of 2008. People were willing to put up with any sort of government boondoggle in exchange for a glimmer of hope that it might help. Robert Prechter has studied this interconnection and even coined a term for the phenomenon he calls “Socionomics”.
Let’s take a look at what could happen if Prechter is right and we see some major market pain from here. ~Tim McMahon, editor
Big Bear Markets: More Than Falling Stock Prices
Many infamous authoritarian regimes emerged during or after big bear markets
By Elliott Wave International
Fear and uncertainty that drive a severe bear market are the same emotions which can set the stage for authoritarianism, in most any nation.
“Bear markets of sufficient size appear to bring about a desire to slaughter groups of successful people. In 1793-1794, radical Frenchmen guillotined countless members of high society. In the 1930s, Stalin slaughtered Ukrainians. In the 1940s, Nazis slaughtered Jews. In the 1970s, Communists in Cambodia and China slaughtered the affluent. In 1998, after their country’s financial collapse, Indonesians went on a rampage and slaughtered Chinese merchants.” – Bob Prechter, Wave Principle of Human Social Behavior, p. 270
Why do authoritarian tendencies emerge only during bear markets in stocks?
“As society becomes more fearful, many individuals yearn for the safety and order promised by strong, controlling leaders.” – The Socionomist, May 2010
Bob Prechter’s new science of socionomics explains that stock market fluctuations mirror trends in people’s collective mood. In simple terms, when the market is buoyant, it indicates positive social mood; the opposite when a bear market takes over.
The fascinating part is that because the stock market and social mood trend closely together, a forecaster can apply Elliott wave analysis to both — and predict both.
Generally, widespread brutalities and wars do not follow the first phase of a bear market. Extreme violence, when it does occur, often follows the worst part of the market’s downturn — like the end of the Great Depression, a negative social mood period that ultimately ushered in World War II.
But even during the first phase, a negative social mood grows. So, if a forecaster determines correctly where in the wave structure social mood resides, he can make educated forecasts about what will follow in society — given what has happened before under similar social mood trends.
Authoritarianism is a subject of heated discussions these days, which makes it a timely topic for a socionomic study. The latest, two-part issue of the monthly Socionomist gives you just that: A look at historic trends and specific forecasts for the years ahead.
Learn How to Anticipate and Prepare for Political Conflict and War, Bull Markets and Bear Markets. The 118-page Independent Investor eBook covers a vast array of investment topics and exposes myths that mainstream investors accept as fact. Once you learn the real cause of conflict and war, you might be surprised how the stock market plays a key role in forecasting major social events. Click here to download the 118-page Independent Investor eBook for FREE
Read more about Socionomics: The Science of History and Social Prediction
This article was syndicated by Elliott Wave International. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts lead by Chartered Market TechnicianRobert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
