All sorts of arcane measures show fewer investors expect utter financial calamity. But guns and gold tell the story even more clearly.
Stocks of both large gold-mining companies and the top publicly traded maker of guns are up this year, but lagging behind the broader market's rebound since March. Shares of gold miners Barrick Gold and Newmont Mining are up 36% and 21% since March 9, while the Standard & Poor's 500 has jumped 57%. Meanwhile shares of gunmaker Smith & Wesson are up 30%.
This relative underperformance of guns and gold, following their strong surge as fears were highest, suggests a cooling of the panic from early this year.
Guns and gold can be a proxy for fear, since they are hot commodities with people fearing the worst.
"It's a transition from people expecting a financial crisis, to severe recession to seeing on the horizon emerging from recession," says Brian Hicks, co-manager of the U.S. Global Investors.
But it would be an oversimplification, though, to say lagging shares of gun and gold-mining stocks tell the whole story. Still, a closer look shows that:
•The run on guns has cooled. Earlier in the year and late last year, consumers were stocking up on handguns, says Cai von Rumohr of Cowen. Fear of tougher gun-control rules and anxiety the tough economy would push up crime created gun backlogs up to seven times higher than usual, he says.
Meanwhile, the number of background checks needed to obtain guns was up sharply every month this year from year-ago levels, says Rommel Dionisio of Wedbush Morgan. But now, these factors that pushed up shares of top gunmaker Smith & Wesson are easing. The company's order backlog fell $90 million to $177 million in the most recent quarter, Dionisio says.
Now that many people who wanted a gun have one, the industry is likely to see sales declines in October or November, Dionisio says.
•Safety of gold-mining stocks less alluring for now. Gold keeps marching higher, with its price over $1,000 an ounce. Still, investors aren't as enamored of gold-mining stocks as they'd been, figuring they can get better profits elsewhere.
But fear can quickly return. If the economy doesn't recover as strongly as hoped, the dollar runs into more trouble or inflation heats up, gold-mining stocks will regain their luster, says Bill Selesky of Argus Research. "If the economy just flatlines or posts below-average growth, they will look to gold as the safe haven. Gold is a bet that the U.S. economy won't grow as fast as people think."