AI-Driven Financial Foresight

New paper on greenwashing detection by combining Slow (filings-based) vs Fast-moving (media-based) ESG scores. Blog post with paper link here: Slow and fast ESG scores: what do they tell us? Thanks to the diligent research efforts of Svetlana Borovkova and Probability & Partners. Data provided by LSEG Data & Analytics.

We assessed the sentiment of all companies mentioned in media referencing tariffs in the past 3 days. We ranked the companies by their average Tariff-associated sentiment and plotted them below. A minimum of five (5) references in the past 3 days was necessary to be on this list. There are a few surprises - some from the EV space below:1. BYD is positive because it is such a low-cost producer that even with high tariffs its cars will be relatively inexpensive in the U.S.2. Tesla is negative because of the retaliatory tariffs that China is likely to impose in any trade war, hurting Tesla's ability to sell in China plus raising the cost of cars produced at its Shanghai factory.3. Rivian is negative because its cars are already relatively expensive in the U.S. and it has a China-based supply chain, which will lead to even higher costs.

The media is declaring some companies winners and losers following Trump's victory. Below are companies associated with Trump's victory and ranked by media sentiment over the past 24 hours. Note Tesla (Elon Musk) and Palantir (Peter Thiel) are most positive while Meta (Mark Zuckerberg) is most negative.________The methodology behind this study:1. Identify all companies mentioned in the same sentence with "Trump".2. Sentences were selected from 1,000+ global business and investment news and social media sources and published in the past 24 hours. 3. All companies must have been associated with Trump in the same sentence at least 50 times.4. Average the sentiment of each sentence.5. Plot them from most to least positive sentiment in a bar chart (below).

In business media, Kamala has been associated with more positivity (positive sentiment) in the sentences that discuss her versus the sentences associated with Trump. But importantly, the volume of conversation (attention) heavily favors Trump.  So what will determine the US election outcome - sentiment or attention?

We searched our tools for the publicly-traded companies associated with "AI chips" and "GPUs", and we sorted them by media sentiment, with the most positive at the top. ASM International was the most positive over the past 90-days. Of course, Nvidia was the most mentioned overall, but its average sentiment, although positive, did not qualify for the list. As noted in our prior posts (and research), positive media sentiment has historically tended to lead prices higher.

Dear Readers, Today we open with one of the earliest observations of human behavior in financial markets. More than 400 years ago Josef De La Vega identified a behavioral pattern in his advice to individual investors. “As there are so many people who cannot wait to follow the prevailing trend of opinion, I am not surprised that a small group becomes an army. [Most people] think only of doing what the others do and of following their examples. . . .” — Josef de la Vega, 1688, “Confusion de Confusiones” (the first book describing a stock market: the Amsterdam Exchange)

The image shows how VW's share price reacted after announcing their first planned closure of a German factory. In our research we've identified a consistent 1-2 day negative return for stocks following a surprising negative news release. This average negative return is still true for both small and large stocks, including constituents of major global indices. Report coming soon.

Sentiment about a "soft landing" for the U.S. economy has turned from positive ("yes, soft landing is happening") to negative ("we're going into a recession") over the past few days. In the chart below the blue columns are the daily count of mentions of "soft landing" in the global business media. The blue line represents the daily average sentiment for the sentences where "soft landing" appears. The soft landing sentiment flipped negative on Tuesday, Sep 3, 2024 after the ISM showed a continuing mild manufacturing contraction through August. When the narrative shifted, the equity markets started to sell-off.