Connect with us

Markets

Visualizing the Search Patterns of Investors

Published

on

Visualizing the Search Patterns of Investors Over the Last 2 Years

Visualizing the Search Patterns of Investors

When investors need to quench their thirst for the latest news or knowledge, they turn to the all-knowing power of Google.

Whether it is something as simple as searching for “S&P 500 today” or it’s more of an information-finding mission to discover the “Best Dividend Paying Mutual Fund”, search data provides an interesting lens with which to view the topics investors are focused on.

Investor Search Data

Today’s infographic comes to us from New York Life Investments, and it shows investor searches for various investment-related keyphrases by month.

The data starts in January 2017 and goes until November 2018, giving an almost two-year picture into investor search patterns. It enables us to see macro trends of which searches are becoming more popular, as well as a window into certain time periods in which behavior changed dramatically.

Not only can we see increases or decreases in searches for specific keyphrases year-over-year, but we can also see how patterns changed when the market went into corrections or saw increased levels of volatility.

The Macro Picture

Here is a data-driven look at wider categories of search phrases, showing which terms saw the biggest increases or decreases year-over-year.

Category: Investment StrategyBiggest Changes in Search Volume (2017-2018*)
Balanced investment strategy+200%
Maximum diversification portfolio+120%
Define investment portfolio-57%
Aggressive investment portfolio-71%

*Data for 2018 goes until November only.

In terms of general investing strategy, it seems investors were increasingly looking at how to build a “balanced” strategy, rather than having an “aggressive” allocation. The latter was much more popular in 2017.

Category: GenericBiggest Changes in Search Volume (2017-2018*)
Simple investment+182%
Short term investment definition-21%

*Data for 2018 goes until November only.

Looking at more generic keyphrases, people have been increasingly looking for “simple” investments.

Category: Mutual FundsBiggest Changes in Search Volume (2017-2018*)
Large cap index+400%
S&P 500 index today+340%
U.S. stocks+124%
Growth mutual funds+53%
Absolute return funds-38%
Small cap value fund-56%

*Data for 2018 goes until November only.

Investors looked more for “large cap index”, as well as the current status of the S&P 500. Further, they wanted to know less about “Growth mutual funds”, “Absolute return funds”, and “Small cap value funds”.

Category: ETFsBiggest Changes in Search Volume (2017-2018*)
Money market ETF+140%
Emerging markets value ETF+88%
Short term bond ETF+82%
Smart beta ETF-21%
Currency ETF-23%
Define exchange traded fund-38%

*Data for 2018 goes until November only.

Lastly, on the ETF front, investors wanted to know more about “Money market ETF” as well as “Emerging markets value ETF” and “Short term bond ETF”. On the opposite side, fewer investors needed to know the definition of an exchange traded fund.

Click for Comments

Markets

Recession Risk: Which Sectors are Least Vulnerable?

We show the sectors with the lowest exposure to recession risk—and the factors that drive their performance.

Published

on

Recession Risk: Which Sectors are Least Vulnerable?

Recession Risk: Which Sectors are Least Vulnerable?

This was originally posted on Advisor Channel. Sign up to the free mailing list to get beautiful visualizations on financial markets that help advisors and their clients.

In the context of a potential recession, some sectors may be in better shape than others.

They share several fundamental qualities, including:

  • Less cyclical exposure
  • Lower rate sensitivity
  • Higher cash levels
  • Lower capital expenditures

With this in mind, the above chart looks at the sectors most resilient to recession risk and rising costs, using data from Allianz Trade.

Recession Risk, by Sector

As slower growth and rising rates put pressure on corporate margins and the cost of capital, we can see in the table below that this has impacted some sectors more than others in the last year:

SectorMargin (p.p. change)
🛒 Retail
-0.3
📝 Paper-0.8
🏡 Household Equipment-0.9
🚜 Agrifood-0.9
⛏️ Metals-0.9
🚗 Automotive Manufacturers
-1.1
🏭 Machinery & Equipment-1.1
🧪 Chemicals-1.2
🏥 Pharmaceuticals-1.8
🖥️ Computers & Telecom-2.0
👷 Construction-5.7

*Percentage point changes 2021- 2022.

Generally speaking, the retail sector has been shielded from recession risk and higher prices. In 2023, accelerated consumer spending and a strong labor market has supported retail sales, which have trended higher since 2021. Consumer spending makes up roughly two-thirds of the U.S. economy.

Sectors including chemicals and pharmaceuticals have traditionally been more resistant to market turbulence, but have fared worse than others more recently.

In theory, sectors including construction, metals, and automotives are often rate-sensitive and have high capital expenditures. Yet, what we have seen in the last year is that many of these sectors have been able to withstand margin pressures fairly well in spite of tightening credit conditions as seen in the table above.

What to Watch: Corporate Margins in Perspective

One salient feature of the current market environment is that corporate profit margins have approached historic highs.

Recession Risk: Corporate Margins Near Record Levels

As the above chart shows, after-tax profit margins for non-financial corporations hovered over 14% in 2022, the highest post-WWII. In fact, this trend has been increasing over the past two decades.

According to a recent paper, firms have used their market power to increase prices. As a result, this offset margin pressures, even as sales volume declined.

Overall, we can see that corporate profit margins are higher than pre-pandemic levels. Sectors focused on essential goods to the consumer were able to make price hikes as consumers purchased familiar brands and products.

Adding to stronger margins were demand shocks that stemmed from supply chain disruptions. The auto sector, for example, saw companies raise prices without the fear of diminishing market share. All of these factors have likely built up a buffer to help reduce future recession risk.

Sector Fundamentals Looking Ahead

How are corporate metrics looking in 2023?

In the first quarter of 2023, S&P 500 earnings fell almost 4%. It was the second consecutive quarter of declining earnings for the index. Despite slower growth, the S&P 500 is up roughly 15% from lows seen in October.

Yet according to an April survey from the Bank of America, global fund managers are overwhelmingly bearish, highlighting contradictions in the market.

For health care and utilities sectors, the vast majority of companies in the index are beating revenue estimates in 2023. Over the last 30 years, these defensive sectors have also tended to outperform other sectors during a downturn, along with consumer staples. Investors seek them out due to their strong balance sheets and profitability during market stress.

S&P 500 SectorPercent of Companies With Revenues Above Estimates (Q1 2023)
Health Care90%
Utilities88%
Consumer Discretionary81%
Real Estate
81%
Information Technology78%
Industrials78%
Consumer Staples74%
Energy70%
Financials65%
Communication Services58%
Materials31%

Source: Factset

Cyclical sectors, such as financials and industrials tend to perform worse. We can see this today with turmoil in the banking system, as bank stocks remain sensitive to interest rate hikes. Making matters worse, the spillover from rising rates may still take time to materialize.

Defensive sectors like health care, staples, and utilities could be less vulnerable to recession risk. Lower correlation to economic cycles, lower rate-sensitivity, higher cash buffers, and lower capital expenditures are all key factors that support their resilience.

Continue Reading

Subscribe

Popular