The current reading of the Investopedia Anxiety Index is below neutral, indicating a low level of concern.
After the Nasdaq and S&P 500 hit record highs yesterday, index futures are higher after the Labor Department’s October jobs report. Qualcomm’s strong financial forecast propelled the chip companies’ shares. The Nasdaq is up 3% for the week after rising for nine consecutive sessions. Treasury yields fell to 1.5%.
The Labor Department reported that employers added 531,000 jobs in October after a disappointing 194,000 in September. The unemployment rate dropped slightly to 4.6%. Later today, the Federal Reserve will release its consumer credit data, which is expected to rise to $15.9 billion in September after receiving $14 billion in August.
Corporate earnings will also continue to be focused as earnings season is in the air. Dominion Energy, DraftKings and Sempra Energy are among the companies reporting their quarterly results.
Stocks in Europe were stable after the Bank of England surprised investors by holding interest rates at historic lows. In Asia, Hong Kong markets suffered losses as real estate stocks fell amid renewed concerns about debt.
Oil prices sank, after a report said Saudi Arabia’s oil output would soon surpass 10 million barrels per day. Light sweet crude fell below $80 a barrel.
what does the index show
The Investopedia Anxiety Index (IAI) is a gauge of investor sentiment based on the behavior of millions of Investopedia readers around the world. A reading of 100 is considered “neutral”.
The IAI is driven by reader interest on Investopedia in three categories of topics: macroeconomic (such as inflation and deflation), negative market sentiment (such as short selling and volatility), and debt/debt (such as default, solvency and bankruptcy).
In 2012, Seth Steven-Davidowitz launched the . published an article in the new York Times Explaining how he used Google search results to uncover voter bias that voters could not find. Investopedia has over 20 million monthly unique visitors, and in keeping with Steven-Davidowitz’s work, we asked ourselves, “What can the search behavior of our readers tell us about the state of the markets and the economy?”
We have the data: over 30,000 URLs of quality content going back to before the collapse of Lehman Brothers and the 2008 financial crisis. I represented the editorial team in late 2015 and partnered with our principal data scientist, Dr. Ronnie Johnson, to discover patterns in our highly trafficked content. We have carefully selected words on topics that suggest investors’ fears, such as “default,” and opportunistic words, such as “short-selling.”
It is difficult to find a signal in noisy web traffic data due to exogenous factors such as the varied seasonality of our readers (for example, a drop in traffic over the weekend) and search engine results page (SERP) rank. We first needed to develop a methodology to address this noise and create an index that robustly tracks the actual fluctuations and flows of interest in the chosen subjects.
When we first looked at the results of the analysis, we found that the major peaks in the index were exactly where they made sense: around major events like the collapse of Lehman Brothers (the most important peak ever), the Greek debt crisis, and a US credit downgrade by Standard & Poor’s.
In the final version of IAI we used 12 definition pages, all with exceptionally high page view counts. We now also use several thousand more pages in the normalization process. In total we used about a billion pageviews to produce a monthly IAI plot of 10+ years.
We set out to create a proxy or index for investor sentiment, but we needed an external reference. The Chicago Board of Options Exchange’s Volatility Index (VIX), often referred to as the “fear index”, is commonly used as a gauge of investor fear.We plotted the VIX next to our new creation, and the results spoke for themselves:
Despite measuring different events (stock market volatility and material consumption, respectively) over a period of nearly a decade, the VIX and IAI have very similar characteristics of scale. It gets even more interesting when the two are stacked on top of each other:
Perhaps the most compelling comparison is at the very beginning of the plot. For more than a year before the peak of the financial crisis in September 2008, the IAI was deeply elevated (around 120 or so – a level that had not occurred in a month in the most recent four years), while the VIX remained Stayed. Buried, about 20. In other words, based on VIX alone you would be completely away from the biggest financial crisis of our generation, whereas IAI was sounding the alarm for more than a year before the crisis struck.