Market and Coronavirus Pandemic News: Shifting Pendulum Between Optimism and Pessimism
The divergence between sentiment on Coronavirus news flow related parameters and market performance has baffled the market analysts and observers. This week as well was very good for S&P 500 (it has now gained more than 25% in less than a month) and more or less, this is the situation elsewhere too. Most markets are up at least 15-20% and we are now far away from the lows of March.
Fig. 1: The performance plat for S&P 500 over last one month (Source: Google)
But this is only half the story. The on-ground situation on Corona seems to be telling something very different. On Global Coronavirus news sentiment and country-by-country Corona sentiment, things continue to deteriorate. Except for a few exceptions like USA and China, most countries are struggling to contain infections and the statistics are plummeting. Similarly, the global Corona sentiment has deteriorated sharply this week.
Why the market does not seem to be perturbed. There could be multiple reasons including,
a) it had corrected much more than it should have,
b) Fed is injecting so much liquidity in the system and that is driving the markets,
c) the Corona news is already priced in and things have actually improved in worst affected countries such as China, Spain and Italy. Whatever it may be, but deteriorating news sentiment on Corona has not made much impact on markets.
The details and Inferences from Corona and News Sentiment
The discussion on the SIX parameters is as follows:
1) Coronavirus Country-by-Country Sentiment Time Series
2) Coronavirus Aggregate Global Sentiment Time Series
3) Daily Coronavirus Sentiment Heat Map for Countries
4) News Topic Sentiment for Key Words
5) Crude Oil News Sentiment and
6) Aggregate India Equity Markets Sentiment.
Coronavirus Country-by-Country Sentiment Time Series
This is one of the most important charts because market reaction locally depends much more on how Corona News Sentiment is evolving locally. This has deteriorated a bit vs. last week and this week 9/12 countries reflecting deterioration vs. 8/12 countries last week. The good news; both USA and China, the most important affected countries show a considerable improvement.
Fig. 2: Country by country sentiment score for select countries focusing on Coronavirus related news
Coronavirus Aggregate Global Sentiment Time Series
The aggregate Global Sentiment on Coronavirus sentiment has deteriorated sharply as there are talks about ‘W’ shaped infection trajectory and next wave. This deterioration is at odds with improvement in USA and China. The more important takeaway is that the deterioration is rather sharp and Global Corona sentiment is at the lowest level seen in more than a month. This is not good news.
Fig. 3: Aggregate Coronavirus related news Sentiment
Daily Coronavirus Sentiment Heat Map for Countries
The sentiment has got better in Canada, China and Sweden. But things don’t look that good in India, Iran, Korea and Poland. There is a dichotomy here as the Heat Map on an aggregate basis looks in general better than how it looked last week while as we discussed previously, the Global Coronavirus sentiment has deteriorated sharply and on country by country basis, there has been a worsening of sentiment. We have no idea why this should be the case.
Fig. 4: Coronavirus related News Sentiment Heat Map
News Topic Sentiment for Key Words
Because markets are influenced by the sentiment for news flow around some very important and immensely popular key words, the results are important for market direction. There is a very high level of pessimism around Chinese economy and the situation is almost the same on this as last week. The big swing continues to be on news sentiment around US President, Donald Trump. The sentiment on Trump continues to swing from one extreme to another week after week and this time, there has been an improvement.
Fig. 5: News Sentiment for select topical search terms
Crude Oil News Sentiment
The markets are negative on demand environment as reports from multiple countries continue to come how consumption and demand have fallen off the cliff.
Fig. 6: Daily oil related News Sentiment
Aggregate India Equity Markets Sentiment
This is now operating in a narrow bad and in-line with this change, the market has become much less volatile. Overall, we don’t think the change in India Market Sentiment is significant this week.
Fig. 7: Aggregate India Equity Markets Sentiment
EM Alpha LLC
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EMAlpha, a data analytics and investment management firm focused on making Emerging Markets (EMs) accessible to global investors and unlocking EM investing using machines. EMAlpha’s focus is on Unstructured Data as the EMs are particularly susceptible to swings in news flow driven investor sentiment. We use thoroughly researched machine learning tools to track evolving sentiment specifically towards EMs and EMAlpha pays special attention to the timely measurement of news sentiment for investors as these markets can be finicky and sentiment can be capricious.Our team members have deep expertise in research and trading in multiple Emerging Markets and EMAlpha’s collaborative approach to combining machine learning tools with a fundamental approach help us understand these markets better.
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