About TrendPointers Methods
There are hundreds of current economic indicators, but Sentiment is the one indicator that encompasses all the market influences to tell the prevailing mood of the market and where it is heading over the near term future.
Individually, each indicator provides a valuable insight, but it is the continuous and cumulative impact that creates attitudes, affects current decisions and influences future behavior.
TrendPointers has adapted analytical techniques we have used in behavioral and communications research disciplines to create a simple, near real-time process to capture the subtleties of changing sentiment before the sentiment becomes common knowledge.
The Business Value of Accurate and Early Economic Sentiment Indicators
The 5 Principles of TrendPointers Precast Signals
In our information age no idea is secret for long. Economic issues that make the news do not just happen; they start long before anyone connects the dots. Most sentiment related events become “trends” near or at their peak of visibility, often after the most profitable decision making stages have been reached or passed.
TrendPointers captures sentiment in near real-time, in the original context, every day, as it begins to influence attitudes and long before it is fully captured by other after-the-fact techniques. PreCasts are reported biweekly and are available within 5 days after close of measurement.
2. True sentiment detection is not just a science, it is an art.
At TrendPointers we are experts in attitudinal and behavioral research in the marketing environment. We’ve adapted our decades of experience to a methodology to monitor and distill the pervasive and daily flow of public information into a simple and consistent measure of sentiment.
• PreCast Signals uses a multi-point scale of the prevailing economic mood, not a single index number, and its sensitivity identifies the subtleties of direction and intensity of sentiment shifts which are the precursors of measurable changes.
• PreCasts captures both trends and volatility. Volatility has become increasingly important, and while long-term decisions cannot be based on daily or weekly fluctuations, the actual impact of volatility appears to have extraordinary influence on the shaping of attitudes.
3. TrendPointers Captures The Raw Materials Of Sentiment
Sentiment is the highest order term to describe the cumulative body of knowledge, opinions and expectations as a result of acquiring and interpreting a body of information.
We continuously monitor the economic issues that are highly visible, volatile, shape financial events, both positive and negative, and reveal opportunities or warnings for early decision making. Currently we monitor sentiment about the three core issues of our day.
• Overall Economic Environment: The overall sentiment about the US economy.
• Housing: The most watched economic factor. Its performance has a dramatic ripple effect throughout the economy.
• Recession Watch: Add it all up and the daily discussion is about recession, depression and economic recovery.
In the next near future we will be adding “inflation” and “China”. Custom sector-specific sentiment measures can also be developed.
4. Watchfulness and News migration: Since we don’t know when or where the information we need may emerge we watch a vast array of sources as it migrates up a news chain. Sentiment is currently tracked in two sources: business media and mass media.
Sentiment is also not localized in any one place. Different sources of information serve different markets, may have different points of view, and may even use a different vocabulary to communicate their views.
In our original research we compared the business media , mass media and guru media, and found that business sources have by far the best correlations with economic behavior measurements. Although all trend lines have the same basic orientation, we established business media as our core indicator and developed a proprietary methodology for a discrete set of information sources that maximizes representation of public news, and assessed using a dedicated lexicon and coding process. One way to describe news migration is this:
Guru media was relatively static, the equivalent of buy-and-hold. Gurus maintain a strategy which changes slowly and over a long-term. Eventually all gurus will be right at some point, but not at the same time.
Mass media primarily describes what is happening, less emphasis on speculation, discussion and forecasting.
Business media also discusses the current situation, but has a broader emphasis on the entire spectrum of opinions, forecasts and historical comparisons.
5. It’s great to know what people are thinking? But does it have any relationship to what they actually spend?
An accurate measure of sentiment does not fulfill its true value unless it can also relate to the future consequences of that sentiment. Will current measures of sentiment actually anticipate real consumer spending? For TrendPointers PreCasts, the answer is yes.
In a statistical comparison with over two years of data PreCast Signals demonstrate a superior predictive relationship with future reports of economic activity from 4 to 20 weeks in advance of official reports. A complete summary across important industry groups are presented in the Performance section.
Why Sentiment Signals Belong in Your Economic Models:
Sensitivity — Intensity — Timeliness.
TrendPointers recognizes that confidence/sentiment measures have been and can be an even more useful component in economic models. We have applied our 30+ years of behavioral and communications research expertise to creating a better tool for business planning.
TrendPointers specializes in only one service – economic sentiment. Whatever information you now use to watch the markets and consumers, whatever type of economic sentiment and confidence indicators used in your models, TrendPointers PreCasts will give you an earlier and more sensitive measure of economic sentiment.