US Sentiment Continues At High Levels

This month's calculation of the US Sentiment Index is based on a larger coverage of equity events than in previous studies. RavenPack has gone from probing about 170 different news events to covering more than 270. Especially, there is more coverage around clinical trials, mergers and acquisitions, and regulatory issues. With so many scheduled and unscheduled firm-specific events covered, it creates an opportunity to develop special indexes based on certain types of news only like earnings or products and services.

After having improved for four consecutive months, the US Sentiment Index stabilized in August dropping slightly by 4 points. The index continues in positive territory above 80, signaling a strengthening economic environment. After having seen a 4.7% drop in the S&P 500 in August, September is on to a strong recovery continuing the positive trend we have seen in both market returns as well as in news sentiment.


FIGURE 1: US Sentiment Index vs. S&P500 Cumulative Returns

The recent drop in the US Sentiment Index is supported by deteriorating news in August for only five out of ten sectors. Over the past 3 months, the strongest build up in sentiment has been observed in the Health Care Sector followed by Basic Materials, Industrials and Financials. Although still positive over a 3 month period, the sentiment around Industrials suffered a strong loss in August dropping to 10th place.



TABLE 1: Sector ranking based on 90-day sentiment changes (As of August 31, 2010)

The US Sentiment Index is determined by in-depth analysis of news coverage on companies comprising the S&P 500. Using RavenPack's proprietary news analytics technology, the US Sentiment Index examines the language and events disclosed across thousands of news articles in real-time. This timely analysis captures the sentiment conveyed on stocks before investors fully digest it.

Where perhaps confidence surveys and polls are more explanatory in nature, new and innovative ways to capture market sentiment are coming from news information - what drives our mood and investment decisions.