October 2006, The Elliott Wave Theorist
by Mark Galasiewski
The Socionomics Institute
The influence of social mood on automobile color preferences was first evident early in the 20th century when Henry Ford offered his Model T in various colors. In the years around 1909, the social mood was at peak positive, and consumers were in the mood for colors. The stock market (as registered by the reconstructed S&P 500, not shown) had been advancing for 13 years. President Teddy Roosevelt was at the peak of his popularity. And the tallest buildings in the country, the Singer and Metropolitan Life Buildings, had just opened in New York City. As the social mood cycle passed through a falling transition stage early in the century’s second decade, Ford initially continued to offer colors on the Model T. But he eliminated the option in 1915 as the decline accelerated and the war in Europe intensified. For the next 11 years consumers could buy Model Ts only in black. In the 1920s, the upward swing of the mood pendulum brought brighter and more varied colors back to mass-market cars. In 1923, DuPont developed fast-drying color lacquers for automobiles. Ford, having fallen into the same complacency that has tripped up many a car manufacturer since, adopted the new paint technology relatively late. In 1926, in the middle of the boom, he could no longer deny consumer demands for color variety.
Ford’s decision to continue offering only black cars during the late teens and early 1920s may have been a wise choice economically (the “Japan” or Brunswick” black lacquer he used cost less and cured up to 7 times faster than color variants). But analysis of automobile color preferences during later periods suggests that it was not the best choice socionomically. According to the records of DuPont Automotive, which began tracking the popularity of automobile colors in 1953, black is mainly a positive-mood color. Black, white, and red tend to expand in popularity during bull markets, collectively peaking near mid-point. Color consultant Leatrice Eiseman says that an owner of black is “empowered, not easily manipulated, loves elegance, appreciates classics”—traits characteristic of rising mood trends.
Another automotive entrepreneur sensitive to the power of color was the flamboyant E.L. Cord, whose career during the 1920s and 1930s was practically a meter of social mood all by itself. Cord was already a successful car salesman when he joined the troubled Auburn Automobile Company in 1924. He quickly sold off 500 unsold cars after repainting them in bright colors—a feat that convinced Auburn management to hand him control of the company. But bright colors worked against Cord during the 1930s, when the social mood dictated use of earth tones. Eiseman says that deep brown implies an owner who is “down-to-earth, no-nonsense,” taupe/light brown expresses “timeless, basic and simple tastes,” neutral gray suggests “sober, corporate, practical, and pragmatic,” and dark green implies “traditional, trustworthy, and well-balanced.” Such values were the antithesis of those represented by the land yachts in Cord showrooms during the Depression years, which were painted lemon, chartreuse, and Chinese red.
The postwar bull market gathered steam in the late 1950s, and consumers abandoned the dark shades that dominated automobile colors during the prior two decades in favor of more intense hues. The energetic new mood demanded angular forms and more intense colors. Recognizing a relationship between color and form, N.J. Mooney, DuPont’s color advisor at the time, wrote in 1955:
In the early Thirties, it was possible to produce many equally bright colors. However, the bulky models of that era were not conducive to the use of brilliant colors, and it was only with the introduction of the elongated lines of the hard top models that colors of this type effectively complemented the automobiles…. The trend toward colors of high intensities became widespread late in 1954 with the introduction of the 1955 models, and today the public is offered the widest selection of color in the history of the industry.
The color white, which Eiseman says indicates “fastidiousness” (i.e., meticulousness, a positive mood trait, as opposed to sloppiness, a negative mood trait) dominated the top spot for 11 years from 1955 to 1965, followed by blue, turquoise and black. The technical difficulties of preserving the quality of red in automobile paints restrained use of the color until chemists solved the problem in 1963. But red, which Eiseman says is “sexy, speedy, high-energy, and dynamic,” made its mark through its other shades such as purple-maroon, orchid, and coral-pink. The surge of coral-pink into the top three shades sold in 1957 marked the high point for the three “mainstream” positive mood hues at a market share of approximately 50%. We hypothesize that the subsequent divergence of the three from the stock market’s trend signaled that the postwar stock market rally was entering its final stages on an inflation-adjusted basis.
The only time that a bear-market color entered the top three from 1957 to 1966 was 1961-1962, during the same social mood decline that produced a violent stock market correction, the Bay of Pigs incident and the Cuban Missile Crisis. A brown shade—medium brown-gold—took second place in both years. In 1966 the negative mood colors began an 8-year assault on American automobiles that would eventually gain them a 66% market share. By no mere coincidence, that same year a bear market began a 9-year attack on stock prices (17 years on an inflation-adjusted basis); the United States stepped up its attack on Vietnam; China imploded in the Cultural Revolution; and social life in the United States entered a period of volatility that would eventually lead to the resignation of the President in 1974.
The shift was gradual at first. Starting in 1968, when hand-painted, floral-print Volkswagen Beetles and Buses became a sign of the times, what we observe to be the “post-peak” primary color—yellow—first showed its influence. DuPont calls yellow (and its more prominent sibling, red) a “notice me” color. According to Eiseman, sunshine yellow represents a “sunny disposition, joyful and young at heart,” and bright yellow-gold is “intelligent, warm, loves comfort and will pay for it.” During the bear market rally years of 1967 and 1972, yellow-gold surged to 7.8% and 9.9% of sales, respectively, the best performance of any individual yellow shade on record. In 1971, midway through the correction, two yellow-influenced, “mixed-mood” colors—yellow-green and copper-bronze—appeared for the first time in the top three. But by 1974, the year that the DJIA bottomed, the yellow shades had completely relinquished their top rankings to the bear-market hues of maroon, beige and darker shades of green. Red in all its shades (except maroon, which we classify as a brown) disappeared completely as a color option for intermediate/full-sized cars in 1974. The only other year on record that lighter shades of red disappeared completely for the category was 1982, the year of the inflation-adjusted bottom in stocks. In that year manufacturers offered only light and dark red-brown (which we have also classified as browns).
After the negative mood trend exhausted itself in the early 1980s, intensity returned to automobile colors, highlighted by an explosion in the popularity of red in the middle of the 1982-2000 rally. In 1983 Prince released the song “Little Red Corvette,” and the following year Bruce Springsteen crooned about another shade of red in his song, “Pink Cadillac.” In 1985 dark red became a top three color, replaced by medium red in 1986. In 1988 the industry offered a color called “bright red.” By 1989, USA Today found the trend toward brighter automobile colors—and its similarity to the one during the last bull market period—newsworthy:
Cruising Main Street in a turquoise ragtop or metallic-purple muscle car may be a faded memory, but get ready: American Graffiti-style colors are back. Automakers plan a 50s revival for 1990 and ’91. Hot colors: bright reds, yellows; pearly whites, creams, metallic greens, taupes and teal… Buyers in ’88 chose white, red and gray over darker shades of the early 80s.
In 1990, the “mainstream” bull market colors collectively topped out—recalling their 1957 peak in the middle of the postwar rally and again signaling that the advance was about half over. The positive mood of the dominant upward trend kept the bullish colors elevated. But an undercurrent of negative mood forces, similar to the one that appeared during the correction of 1961-1962, began to surface. The pessimism of the early and middle 1990s cloaked itself in greens and browns, which together took a 37% market share by 1994, up from 6% in 1990. Followers of investor sentiment have long recognized that pessimism following the 1987 crash reached its extreme in 1994. Figure 6 shows that the extreme sentiment of that year was a product of a fourth wave skewed triangle (a new triangle variation proposed in the May 2006 issue of The Elliott Wave Theorist) and a second wave correction (when sentiment often exceeds even that seen at the beginning of first waves).
Since 1998, the biggest story in automobile color has been the rise and then the absolute dominance of silver. Silver entered the top three in 1999, displaced white as the most popular color in Europe and North America in 2000, and became the #1 color globally in 2001. The color has less precedence than others as a meter of social mood, having first emerged as an automobile finishing in 1974. But its history since then suggests that silver is a “post-peak” color that precedes deeper pessimism in the future. Eiseman says that silver is “elegant, loves futuristic looks, cool”—a perfect description of post-peak complacency, in our opinion. At the risk of overanalyzing a limited series of data, we note that silver has a peculiar habit of peaking some years after major stock market tops and some years before final bottoms in sentiment. Silver first enjoyed a run-up during the rally in stocks from 1974-76, and its popularity peaked a few years later, in 1979. After disappearing as a category altogether following the bear market low in 1982, the color returned as an option leading up to the stock market top in 1987, and its popularity again peaked a few years later, in 1991. Halved in stature by the pessimistic mood of the early/mid-1990s, silver then began a meteoric rise in 1998. By the time it peaked in 2002, two years after the stock market top in 2000, it covered approximately 28.1% of all new cars. A market share of about 20% usually signals saturation for top-3 colors, so silver’s 6-year run above that level is—like the topping investment mania it has mirrored—unprecedented. With the color still holding a 21% market share in 2005, we would definitely short-sell silver right here.
During the 2000-2002 decline yellow again played a subtle but meaningful role after many years of neglect. In its 2001 color report, DuPont recognized the flashback to the earlier post-peak era that yellow represented:
An ongoing retro-trend also is apparent with the rise of yellow as a top-12 color over the past two years, with continued gains predicted for 2002. It is seen in pale shades and soft golden metallics for sport luxury vehicles with stronger hues adding punch to sporty cars and light trucks. The last time yellow experienced this level of popularity was when bright sun-colored VW Beetles tooled down the road to the tune of the Beatles’ “Yellow Submarine.”…The move to a “heritage look” through classic colors such as yellow may be driven by consumers’ need to connect with comfortable traditions while still embracing a bit of optimism.
The 2004 report pointed out that yellow joined the ranks of the top 10 in 1992, another post-peak period (see the end of the upper boundary of the triangle in Figure 6). When DuPont releases the 2006 model year figures, we will not be surprised if yellow shades again play prominent minor roles on 2006 automobiles as the current rally peaks.
Since 2002, brighter colors have returned to select categories of automobiles and in muted combinations, reflecting an “improved-but-less-than-optimal” mood during the bear market rally. As DuPont noted in its 2005 year-end summary:
While silver continues its six-year reign as the number one color choice, it continues to decline in popularity in favor of a fuller palette of true, high-chroma colors. Silver is also giving way to its sister neutral color—medium dark gray. Significant 5% gains were seen in 2005 color trends for gray in complex formulations that show color infusions of various color hues.
The emergence of gray does not have directional implications for social mood. Gray, like blue, on automobiles shows no consistent pattern of correlation to the stock market. But the recent use of gray to dilute the brightness of other colors suggests that the negative mood trend is beginning to reassert itself.