Aggressive Surge Impacting Shutdown Talks: Preliminary Outlook for Monday

Over the weekend, the mood factor associated with aggressively pursuing group agendas surged in U.S. collective mood (see chart below).  It has not been this high all year.  At the same time, the capacity to understand a different point of view or pursue diplomatic negotiations is near the low for the year.  There is almost no chance of any resolution on the government shutdown anytime soon, with one possible exception.

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The only way for some type of budge in the current impasse would be for group identity to shift.  "My group" would have to include both parties.  In other words, instead of Tea Party or Democrat or anti-Obama, etc.  the majority would need to see "My group" as a larger whole, for instance, "American."  This may sound absurdly simple, but if it was that easy we would be there now.  The fastest way to get this type of shift would be to have an emergency or disaster that comes from "out there" affecting all or most Americans in some way.  This could be a human caused emergency such as a terrorist attack, a market crash, or even a natural disaster of some type.  It will be interesting if such an emergency shows up in the nick of time to create this cohesion and unity out of the chaos.  Otherwise, an agreement might have to wait until the social mood is more conducive to negotiations on its own.  It will get there at some point.

Preliminary Market Outlook: Moderately to Sharply Down
Monday's official outlook won't be released for another four hours, but here's what we got at this moment (see chart).  Social mood is near breaking down below support again.  Markets could be in for quite a tumble if nothing improves between now and Monday morning.

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Note: data for U.S. social mood are scores in eight MoodCompass categories of Google Hot Trends, data for news are scores of top Google U.S. news stories.

As News Deteriorates, Markets are Heading over the Cliff

Various pundits say the U.S. budget and debt limit crisis could affect the markets and possibly unravel the fragile economic recovery that apparently is on its way.  If Monday's preliminary collective mood charts are even close to the final version we will publish in about 18 hours, there could definitely be a problem. 

Our preliminary charts for Monday show a plunge in the mood reflected by the news.  They also show social mood dipping below support.  Does this mean a sharp market drop is at hand?  On Friday, in our after market notes, we shared this: "If both the mood and the news go south over the weekend, that could spell big trouble next week."

Hmmm...

Below are the preliminary charts for Monday.  They show a 1-2% drop is possible on Monday.  The news chart is pretty ominous looking, but the top one, the social mood chart is actually hopeful, as it is bad but not terrible.  As that will be behind the decisions made, and it hasn't solidly broken down, markets may hang in there and not drop precipitously.  Perhaps there is even a chance for a last minute deal.  Stay tuned for the final chart early Monday morning.

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