The Google Search Trends Indicator: The Stories That Google Trends Data Tell About The Economy [Charts]

 @lisamahapatra
on October 23 2013 12:23 PM
Google Walk
A woman walking by Google. Reuters

The S&P 500 might be falling today, but it has risen in nine of the last 10 trading sessions, and it's already about 5 percent higher than its government-shutdown low of a week ago. Even a disappointing jobs report did little to temper rising equities, likely because investors are starting to associate lackluster indicators with more QE action from the Federal Reserve.

So doesn't a stock rally mean good things for the economy? Not this one, said Nicholas Colas, chief market strategist at ConvergEx Group, a global brokerage company based in New York, in a note to investors.

“You could easily call the current market move the ‘tree falling in the forest rally’,” he said. “‘Real’ rallies have the compelling impetus of social attention. This isn’t that kind of rally, and I can prove it.”

Colas looked at Google Trends data for the search terms "investing," "stock quotes" and "food stamps," and here’s what he found:

From the note:

The peak volume of Google searches for “investing” and “stock quotes” in the U.S. from 2005 to the present was back in October 2008, during the depths of the financial crisis. People wanted to know what their assets were worth – not because they were rising in value, but because they were plummeting. Since then, the number of Google searches for those terms has been cut in half or more. Yes, equity asset prices have more than doubled, but interest in tracking that progress is diminishing daily. In contrast to financial markets, interest in the search term “food stamps” is up over 50 percent since October 2008, even excluding the jump from the recent system outage.

Colas looked at some additional Google Search terms for clues to the state of the economy, and here’s what he found:

“Bernanke” vs. “Greenspan” vs. “Kardashian”

“The recent publication of former Federal Reserve Chairman Alan Greenspan’s latest book has given him a boost in terms of Google searches, but current chair Ben Bernanke has maintained a comfortable lead since 2009. If you want to touch the hem of real fame, consider the comparison of Chairman Bernanke to the Kardashian clan. Google Trends shows that the reality-TV clan outscores the Fed chair by anywhere from 30 to 100 to one.”

“Janet Yellen” vs. “Amy Winehouse”

“Janet Yellen managed to beat [deceased singer] Amy in terms of search volume on October 7-8-9th, the days around the announcement that she was President Obama’s choice for the next Chair position at the Federal Reserve. Since then, it has been back to the old pattern: Amy Winehouse searches outnumber Janet Yellen queries by a factor of 7:1. Don’t worry, Janet – tears dry on their own.”

“Buy a House” vs. “Rent a House” vs. “Rent an Apartment”

“Don’t believe all the hype about how Americans don’t want to own their primary residence anymore. The Google data kills that meme. Searches for “rent a house” are essentially flat over the last three years. “Rent an apartment” is looking better, but little growth there for the last 2 years.”

“TMZ” vs. “WSJ” and “Wall Street Journal”

“You’d think the prospect of reading about how to improve your finances and live a more independent life would trump Kanye/Kim, the Jacksons, and random pictures of celebrities behaving badly. You’d be so, so wrong. Crazy wrong. TMZ’s score for October 2013 was 61. WSJ and Wall Street Journal's search scores: 11 and 15.”

“ETF” vs. “Mutual Fund” vs. “Hedge Fund”

“Another example of the odd inversion between higher markets and lower social engagement in markets: October 2008 was high-water mark for Google searches for the terms ‘ETF’ and 'mutual fund’ and ‘hedge fund’ over the last five years. It has been all downhill since then, even as stock markets have continued to climb.”

“Searches for ‘mutual fund’ have been in persistent decline since 2005. The high point by Google’s measure was an index measure of 100 in January 2005. Now, that number is 19.

“‘Hedge fund’ as a search term doesn’t fare much better, with peaks around the financial crisis in terms of searches and down ever since.”

“‘ETF’ is the most popular of the three, with roughly double the number of Google searches relative to the other two.”

“TSLA” vs. “GOOG” vs. “AAPL”

“When a company has a stock symbol distinct from its corporate name (i.e., TSLA rather than GM), using Google Trends to track that ticker is a useful way to measure social engagement. More people punching ‘AAPL’ into Google is one sign that they have an interest in Apple’s stock rather than reading about the latest iPad.”

“Looking at the Google Trends charts for ‘TSLA’, ‘GOOG’ and ‘AAPL’ is therefore a proxy for retail investor interest in these names. Don’t take that as a buy/sell signal, of course – institutional investors are way more than half the stock market. Still, from a social perspective – the focus of this note – it bears mentioning that ‘TSLA’ and ‘AAPL’ appear to be in decline when it comes to the number of times Google receives a query for those terms. ‘GOOG’ is relatively flat, by comparison.”

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