Social mood plays a crucial role in influencing the stock market. Socionomics tells us that changes in how people feel, whether positive or negative, tend to influence their subsequent behaviors and choices.
For example, during periods of positive social mood, optimistic investors tend to buy stocks, creating bullish market conditions. Conversely, in times of uncertainty, the negative mood of investors typically results in increased investments in defensive assets such as bonds and money market instruments, leading to a decline in the stock market.
According to Robert Prechter, the proponent of socionomics theory, one way to identify changes in social mood is by observing people’s movie preferences. The trend in the types of movies people watch reflects the prevailing social mood and could serve as an advanced indicator of the market.
Using the box office results of the annual Metro Manila Film Festival (MMFF) as an indicator, we can observe that during the time when the Philippine Stock Exchange Index (PSEi) was on a downtrend from 2000 to 2002, the movies that secured the top spot were all drama films, reflecting the negative social mood.
“Tanging Yaman” (2000), “Bagong Buwan” (2001) and “Mano Po” (2002) were the most-watched movies during this period when the PSEi lost 52.5 percent in three years.
But in 2003, when the stock market began to recover, the movies that dominated the annual MMFF were fantasy and comedy films such as “Captain Barbell” (2003), “Enteng Kabisote Part 1” (2004), “Enteng Kabisote Part 2” (2005), “Kasal, Kasali, Kasalo” (2006) and “Sakal, Sakali, Saklolo” (2007). The change in social mood during that period propelled the PSEi to almost triple in value over five years.
It is interesting to note that in 2008, there was a global financial crisis that caused the PSEi to lose 48 percent, perhaps the largest one-year loss in history. However, the prevailing social mood during that time was surprisingly positive.
During that same year, the No. 1 movie at the MMFF was a comedy film called “Tanging Ina N’yong Lahat.” This positive social mood, despite the financial crisis, indicated that the market decline was a major correction and signaled the beginning of a multiyear bull market in the following year.
The 10-year period from 2008 to 2018 was a period of rising stock prices, low interest rates and falling inflation. This era was marked by optimism, increasing investor confidence and overall positive economic indicators.
The economy saw an average annual economic growth rate of 5.9 percent, while the PSEi grew by 14.8 percent each year. The prevailing positive social mood was reflected in the movies that dominated the MMFF during this period, primarily comedy films, notably those by Vice Ganda, such as “Sisterakas” (2012), “Girl, Boy, Bakla, Tomboy” (2013), “The Amazing Praybeyt Benjamin” (2014), “Beauty and the Bestie” (2015), “Gandarrapiddo” (2017) and “Fantastica” (2018).
In 2019, although the PSEi ended the year on a positive note with a 4.6 percent return, social mood began to shift. The top movie at the MMFF that year was no longer the comedy films the public was used to but a tear-jerker called “Miracle in Cell No. 7,” starring Aga Muhlach.
This negative social mood resulted in a period of fear and anxiety in the years that followed. The top MMFF movies during those years were not comedy or happy movies, but drama films such as “Fan Girl” (2020) and “A Hard Day” (2021).
In 2022, the economy reopened following the end of the pandemic. Many analysts were predicting that the stock market will recover, but negative social mood persisted as the PSEi closed with 7.8 percent loss.
During that year, the top-grossing MMFF movie was a horror movie called “Deleter,” marking a historic moment as it became the first horror movie to win “Best Picture” in years. The negative social mood at that time signaled that the stock market could face further decline in the following year.
Indeed, despite the strong performance in January last year, which saw gains of up to 8.6 percent, the PSEi was on a downtrend throughout the year, losing as much as 17 percent from its peak to close 2023 with a 1.8 percent loss.
Today, the No. 1 MMFF movie from December was an emotionally sad film called “Rewind.” This was closely followed by “Mallari,” a horror film and “Gomburza” a historical drama. If we were to observe historical patterns of social mood reflected in the box office results of MMFF, we could anticipate that the PSEi might end the year with another loss. INQ
Henry Ong is a registered financial planner of RFP Philippines. Stock data and tools were provided by First Metro Securities. To learn more about investment planning, attend the 105th RFP program this January 2024. To register, email info@rfp.ph or text at 0917-6248110.