In January, we published a summary of expectations for 2014. Using a translation of then available social mood data into cyclical projections for the upcoming year, we filled in the blanks with a best-guess narrative for 2014. The data showed a large spike in oil/fuel prices in March and April, surrounding an international crisis. There were indications that the Iran negotiations could run into difficulty. We put those together in our narrative. The actual picture was much more complex, with several new situations. In March and April the Ukrainian crisis was accompanied by an increase in oil/gas prices and volatility of global markets. In fact, on March 2, from our daily data, we were able to announce as imminent, a large international crisis impacting the U.S. only a few hours before news broke about Ukraine and possible Russian involvement.
The global situations continued to unfold. In June, ISIS was an issue, and the continued stability of Iraq was a concern. Social mood data continued to lack the signs of full relief and release that would indicate things might settle down for more than a moment. In our last post (August 7), our conclusion was that these waves of global disasters were not finished. We stopped posting after that. What more could we keep saying that would be of any use? Why continue to drone on with "more disasters to come?" On September 29, a reader commented, asking for an update. We decided to oblige.
Looking back at the data we had at the beginning of the year, we can now add to the narrative, as many of the details surrounding context has been filled in (Undoubtedly, there are also new surprises yet to come).
Our forecast for the stock market (S&P) for the year was near unchanged. Based on that, in our January presentation we said not to worry about a total market meltdown, and assured the Fed would do what it needed to keep the market at least near unchanged. At this point, with the market still up about 5% for the year, many different scenarios could result in ending the year with the market near 1850. One of those would include a sharp drop (crash) and modest recovery. Another is a large rally followed by a sharp drop. Another would be a slow meltdown from current levels. No matter how we get there, the expectation is that we end the year somewhere near 1850.
Health issues came up in our data for the year, but we decided not to emphasize this point. We mentioned in the summary that it would be a good idea to get rest, exercise, eat healthy, etc. Six months ago, the data started showing signs of an approaching epidemic affecting the U.S. As we saw stories of Ebola in West Africa, we were quietly crossing our fingers that this had nothing to do with the U.S. indicators (what could we say, and to who?). As of a few days ago, Ebola arrived in the U.S. If the data reflected actual likely U.S. numbers of Ebola cases, this would not be anything like the plague in fatalities, but would definitely cause people to be concerned, possibly changing behaviors in public places. It is likely that there would be quite a few more cases (more than double digits) before this is over.
Finally, a major turning point was mentioned in the summary occurring shortly before the November elections in the September/October timeframe. We are in the midst of this now. During this period, the focus of the U.S. government (and people) shifts from international issues to domestic issues. There is not a lack of international issues, but a shift of priorities. Economic concerns should increase, and possibly other matters of a domestic nature. Also mentioned in the summary, is that incumbents are not likely to do well in the elections. These internal issues are the reasons why. As the year comes to a close, the U.S. may also look more weak or vulnerable to the rest of the world than it has for some time. This may be due to the issues now beginning to come into focus.
On the positive side, there is a better chance than there has been all year, for diplomatic agreements to be reached in November or December. It will be seen how this affects dealings with Iran, Russia, and China in the coming months.
