The last two blog posts focused on quantifying news stories to shed light on Earnings news
and M&A news
. Today, we'll carry on with this theme to look at "Recession" news. Again, the idea here is to collect news articles on S&P 500 stocks and then compute the percentage of that overall news flow that has to do with "recessions".
The charts below plot recession news (see top chart) and the SPY ETF (i.e. S&P 500 ETF) on the lower chart.
News articles for S&P 500 stocks: Recession News
(percent of overall news flow)
SPY (S&P 500 ETF)
The most salient point we can deduce from these graphs is that recession news spiked in Aug 2011 to around 0.35% of the overall news flow. This massive spike corresponded to the sharp market sell-off. Then, as recession fears mitigated, recession news flow dissipated, and the market began it's 2012 rally.
As investors, we have some obvious questions about this metric:
- Does it have predictive value?
- Does the market follow the news or does the news follow the market?
I don't have a long enough data history to render a definitive conclusion. What's clear however is that news chatter around "recession" certainly doesn't help the market.
Looking at the more recent data, it appears that recession news is nearing a post spike low. This seemingly should bode well for the market going forward.