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Social Mood Theory Says Eric Cantor's 'Surprise' Defeat Is No Surprise at All


We're beginning to see the consequences of Main Street underconfidence.

This article originally appeared on Jeff Cooper's Daily Market Report. To get Jeff's commentary plus day and swing trading ideas each day, take a FREE 14-day trial to Jeff Cooper's Daily Market Report.

Two quick observations on Eric Cantor's surprise defeat this morning.
That a candidate like Mr. Cantor was defeated was not at all a surprise to me. When confidence is low Main Street votes out incumbents and seeks candidates further to the extreme. My friend Alan Hall did a great socionomic study on this behavior. There's also evidence of it in the Greek elections; when confidence was at an extreme low, the extreme consequences affected both the left and the right.
Second, the defeat of an incumbent like Mr. Cantor when the equity markets are at a record high is extremely unusual. Rising markets typically reflect rising social confidence and a move to the middle and the overwhelming re-election of incumbents.
That Mr. Cantor was defeated, particularly in what one would normally consider to be a high-confidence state like Virginia right now, is extremely bearish to me.  

Having written exhaustively on inequality, I feel Mr. Cantor's ouster suggests that the consequences of Main Street underconfidence are now manifesting in action.

Peter Atwater's groundbreaking book "Moods and Markets" is now available on Amazon and Barnes & Noble.
"Peter Atwater brilliantly provides a framework for understanding both the socioeconomic hubris that led to the great credit bubble of the past decade and the dark social-psychological hangover that has resulted from its collapse. In so doing, he offers an invaluable guide to what promises to be a very difficult and turbulent period ahead as we experience what he calls the 'me, here, and now' behavioral tendencies of the post-crash world."  -Sherle R. Schwenninger, Director, Economic Growth Program, New America Foundation

Twitter: @Peter_Atwater
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Author holds positions in SH, JPM and SLV.
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