An Odd Correlation Between Market Crashes And "Socialism"

Yesterday, in an odd attempt to criticize the "financial media for highlighting bearish stories but ignoring bullish ones" and to pidgeonhole "Zero Hedge and friends" as addicted to "permabear newsflow", Citi's Brent Donnelly said the following:

Give the people what they want


In an email I sent Monday, I was critical of the financial media for highlighting bearish stories but ignoring bullish ones. I was thinking about this and realized that maybe you can’t blame the commentators… People just gravitate towards bad news—humans are much more interested in watching a car crash or shooting on TV than a feel-good story. 


I looked at Google searches related to the stock market. The results (Chart1) speak for themselves. My conclusion is that it’s not fair to blame Zerohedge and friends for the permabear newsflow… They’re just giving the people what they want!

To justify his observation, Donnelly provided a Google Trends chart showing the recent spike in such terms as "market crash" and "bear market" at the expense of "bull market" which few if any seem to care about.


We retorted by simply saying that what "people want is not bearish news, what they want is the truth" (especially since google, like the economy, is not supply but demand driven), but what we did not show is a history of this website's traffic. Perhaps if Brent was correct, ZH traffic would meander along a baseline, with occasional spikes roughly correlating to the yellow line above. Instead, we are happy to make public what our traffic has looked like since inception. What it shows is a slow, steady and relentless growing readership base, that has little correlation to intraday market gyrations.

... unless of course, the world is progressively getting worse, in which case Brent may be right; however it would also explain why nobody has any interest in such topics as "bull market" for the simple reason that there isn't one.

However, while we were looking at various other Google trends, we stumbled across the following chart, which may have profound implications for not only U.S. capital markets, and what the media does or does not follow, but ostensibly the outcome of the U.S. presidential election and the overall future of the U.S.

Presenting the broader population's changing interest in "socialism."

What is notable is not so much the current surge in interest in this particular ideology, but that the last time it peaked was in October 2008, just after the US recession had started, and the month after Lehman's failure and the launch of the biggest bank bailout in history.

While one may speculate as to the reasons for the current spike in interest in socialism, we are confident that one person may benefit very handsomely from this curious trend: Bernie Sanders.

And then, another interesting tangent: while google interest in "socialism" peaked at almost the same place both now and in October 2008 for reasons which are still not exactly known, the peak for "capitalism" took place just after the "official" end of the  2009 recession, at which point it returned to its baseline and has failed to see any sustained rebound in interest. 

Which makes us wonder: instead of relying on the NBER to time recessions (or depressions), is it not a better indicator to analyze people's ideological sentiments, which flow through to everything from the markets, to politics, and to broader society, simply by framing periods of economic and market upheaval as starting with "socialism" and ending with "capitalism"?

Yes, correlations do not make causations, but estehtically such an "equality" would very pleasing, and to nobody more so, at least in the current moment, than to Bernie Sanders, and an American population whose fascination with capitalism appears to be waning, at the expense of its ideological inverse.

h/t Alain