Why Investors May Not Be Ready for a Positive Shift in Mood

  • News & views

Is there a mismatch between investors’ current sentiment and the tone of the financial market coverage with which they are being presented? Data and analysis from Dianomi suggest that while online financial content has become markedly more positive in recent months, investors appear to be more skeptical.

In total, some 60% of the online financial articles monitored by Dianomi in August expressed a positive view about markets or asset classes. The figure is at its highest level by some distance since Dianomi began analyzing media sentiment in January 2019, and has risen from just 46% in April.

The swing reflects, at least in part, the recovery of global stock markets since the setbacks of March, when investors worldwide began to appreciate the severity and scale of the Covid-19 crisis. August was a reasonable month for stock markets – albeit with some volatility – with US equities posting gains of around 7%, though European equities were broadly flat. Bond markets also proved robust.

However, investors appear to remain cautious. Dianomi’s analysis shows that overall, investors consumed more online financial content last month, with page impressions up 2.4% compared to July. However, coverage of four leading asset classes – equities, bonds, real estate and commodities – accounted for only 22.5% of this content, a five percentage point fall on the previous month.

Instead, consumers of financial content chose more generalized articles – business and industrial coverage, for example. Even when consuming asset class coverage, they were more likely to focus on broader topics such as the outlook for markets than articles about immediate opportunities to trade. There is continuing appetite for particular interests that feel timely in the current climate – such as coverage of healthcare and biotech stocks, for example – but the overall picture is one of investors holding back from active participation in the markets.

One exception to this trend appears to be real estate investment, where investors consumed significantly more content last month. It may be that in the context of anxiety about conventional asset classes, investors are more inclined to explore alternative opportunities.

More broadly, however, the evidence of Dianomi’s data is that investors do not feel ready to embrace the more positive tone of online financial media coverage. In this regard, they are likely to remain keener to read coverage that anticipates the future direction of markets than articles more focused on immediate investment plans.

That split is likely to be reinforced by any perception that markets are once again at risk of adverse impacts from the Covid-19 pandemic. The increased caseloads seen across much of Europe in recent weeks – including, most recently in the UK – could, for example, prompt further volatility. That would stimulate demand for financial content – consumption peaked this year in March and April at the height of the market turmoil – but investors will be looking for support on advice on how to navigate the ups and downs.

However, even without an increase in volatility driven by Covid-19, content providers may need to reassess the coverage they present to investors. The significant declines registered by leading technology stocks during the first few days of September underline the nervousness of investors on a global basis – and may well have reinforced perceptions that a more positive view of markets is not justified.

The bottom line is that while the shift to more positive coverage in recent months across the financial media is not surprising, given the relative stability we’ve seen in markets since the Spring, investors require more convincing that it’s safe to put their heads back up above the parapet. That anxiety may take longer to dissipate than many anticipate.