There are many mood indicators and we'll only touch on a few here and in no particular order of importance. That's up to you to decide, how many and which.
Auctions as in bonds: The US just sold $13 billion 30-year Treasuries at the lowest yield ever, 2.925 percent. The sale reflects several things about investors' mood: fear or flight to safety; concern about further global economic slowdown and less inflation worries because of it. Auctions also tell you about how well an offering is received or how much of a market there is for it.
Not all auctions are received the same and that brings us to another mood indicator: comparative yields or spreads between offerings by different countries. Take a benchmark for each country, like the recent 10-year government notes yielding 6.5 percent of Italy versus similar notes sold by France yielding 3.04 percent and 10-year US Treasuries offering only 1.85 percent. The German 10-year bund also yields 1.85 percent, giving you a pretty good snapshot of how the market (investors) see risk, in this case default risk. Risk has many faces, interest rates, inflation, political, liquidity, correlation, to name a few. Correlation stated simply is the company you choose to hang out with, the old room full of measles.
Another mood indicator that's been on public display more lately than usual is rating agencies like Fitch, Moody's and Standard & Poor. All have either issued downgrades or imposed warnings about certain sovereign debt and the financial state of those issuing countries' ability to service that debt. Sometimes these rating agencies are late to the chaos as was the case with the Asian tigers in the late 1990s, but their rating changes or warnings bear noting if for no other reason than getting a fix on general mood.
Gold prices, though not always direct, are another mood indicator. Because of its "safe haven" reputation gold prices often reflect fears or the lack thereof about inflation or loss of purchasing power. Gold can also be a proxy on the fate of the US dollar, though again not always linear, and even to a degree interest rates and bonds.
Copper prices are worth noting because of the metal's use in the housing and industrial markets, i.e., growth or economic pick-up versus pending slowdowns. Since gold and copper are commodities and commodities can be broken down into two groups, soft and hard, you probably want to look at currencies as yet another mood indicator.
Currencies can be roughly divided into two groups, commodity-based, like the the Aussie and Canadian dollars and the South African rand, and non-commodity based. In general, commodity-based currencies give some protection against inflation when prices are rising. Rising prices can be reflected in the CPI numbers, but they are not hard and fast because central bank bureaucrats don't like to use indicators in their indexes that are going to too broadly deviate from their agendas. Yes, central bankers world-wide have agendas; that should be one of your first mood indicators: What do central bankers want as opposed to want you want? Often they are not the same. Kick the can is a popular central bank game world-wide.
Energy prices matter. Recent headlines about solar panel prices falling and China glutting US markets with solar panels should indirectly tell you something about energy prices. Couple that with what's going on in the natural gas markets versus coal-powered electric utilities and you get a further snapshot, not to leave out what's rattling around with OPEC, Iranian and Syrian oil; and Libyan oil coming back on the market.
So energy prices can be a mood indicator for various reasons, but again just one of the many ingredients that go into to baking any good mood pie. Given the current holiday season, we wish you and all our readers happy, healthy, properous baking in 2012.
Bond auctions
Spreads
Currencies
CPI numbers
Gold and Copper
Rating Agencies
Energy
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