Early in my career as a reporter at Investor’s Business Daily, I was taught to turn to the stock market for signs of the economy’s direction and strength.
Our newspaper’s founder had made his fortune in stocks and implored us in our reporting to always look to the market, which in aggregate is constantly analyzing real-time data and other information. I’ve kept this approach top of mind over the years and seen its value, particularly when other sources were telling a different story.
This is happening now.
In recent weeks, I’ve been struck by the very different reads on the business environment we get when looking at news headlines vs. the market. The headlines tell something of a grim story, and have done so consistently for some time. The market, while volatile, has turned more hopeful.
Just look at the data. I asked my research team – ChatGPT and Grok – to provide a summary of news-coverage sentiment on stories about the U.S. economy and business environment over the past 4 weeks. The results were about what I expected.
“While pockets of strength, like job growth, provide some optimism, they are outweighed by negative indicators such as GDP contraction, declining consumer confidence, and trade policy concerns,” Grok tells us.
Meanwhile, as of yesterday’s close, the Dow Jones Industrial Average has risen about 9% from its trade-war trough in early April and the S&P 500 is up about 11%.
Now, clearly the market has been volatile during this period. But even that has eased. The VIX index, a widely followed measure of stock-market volatility, is back in the low 20s, down about 55% from early April. A substantial improvement.
I’m not saying we should take this information and adopt a stance of unbridled optimism. There remains much to sort out.
However, I do believe the stock market is seeing more positive signs than the news media are presenting. And when looking for context about the current environment – those of us in the communications business need be well attuned to this – I tend to be a bigger believer in the direction the market provides.