AI-Driven Financial Foresight

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.

How did companies mentioning AI in their Earnings Calls perform over the past 5 years? LSEG's Haykaz Aramyan, PhD and our own Tiago Quevedo Teodoro created a thematic portfolio using our new Transcripts Analytics. See the report here: https://lnkd.in/eNdbDpdZ

Companies affected by the CrowdStrike outage ranked by their outage-associated sentiment in business media. Amazon, Zscaler, and FedEx look to benefit (note their positive associated sentiment), while Telstra, Delta Airlines, Tesla, and American Airlines are hit hardest by the software glitch.

Bitcoin's sudden drop was preceded by a fall in social sentiment. While there may be a short-term bounce, sentiment still hasn't completely shaken out the weak hodl'ers.

The LSEG MarketPsych Transcripts Analytics offers insightful perspectives into the focal points of a company. The accompanying graph, developed by our colleague Elliot Chung, illustrates this by detailing the proportion of mentions that various Apple products and services received during Apple's earnings calls. This is measured as a fraction of the total mentions of all products and services. In the early 2000s, the Mac accounted for nearly 50% of these references. However, post-2007, the iPhone emerged as the predominant topic of discussion. At its peak, the iPad nearly matched the iPhone in terms of mentions, though it has since seen a decline in focus. Although the VisionPro represents one of Apple's most significant recent launches, it is currently referenced only about as frequently as the AirPods and the Apple Watch. Finally, there is a long-term trend in the overall increase in references to services (such as Apple TV, AppleCare, iCloud, etc.)

Which companies are likely to benefit from Nvidia's incredible revenue surge? By scanning global news and social media over the past 30-days, we found the companies with the highest percent of co-references to the topic "Nvidia" in each sentence. In the image below, the company name is to the left and the blue bar length represents the percentage of sentences containing the company name that also contain the proper noun "Nvidia". 1. Dell supplies server hardware2. OpenAI (private) runs on Nvidia's H100 GPUs.3. Nvidia Corp is the legal entity4. Global Mofy is a declining penny stock being linked with Nvidia in social media (caveat emptor).5. Foxconn's stock rallied alongside Samsung and HK Hynix after Nvidia's blowout earnings last week.6. Astera makes components used in Nvidia GPUs.7. NetApp is partnered with Nvidia and provides software tools to manage data across Nvidia infrastructure....and many more (see image below)