Epsilon Theory Professional
In The Flow
Two distinct market narratives that came into sharper focus last week – Global Growth Slowdown! and Democratic Socialism!. The first was pushed by the usual market Missionaries – the WSJ and the FT and the talking heads on CNBC – and the latter was pushed by the usual political Missionaries – Trump and AOC and Bernie and the rest of the 2020 presidential crowd.
But only one of these narratives makes a long-term difference for your portfolio.
For every historical narrative there is a counter-narrative, and every time history repeats itself, the main narrative gets weaker and the counter-narrative gets stronger.
That’s a problem for Jay Powell, as the counter-narrative of Central Banker Lapdog is getting stronger.
Last Halloween the hipsters over at Salesforce.com turned their new San Francisco building into a giant Eye of Sauron. I keep waiting for someone to try this with the Federal Reserve’s Eccles Building, but that would be too on-the-nose.
Narrative Monitors
ET Pro Inflation Monitor
We track the prevalence and attention of inflation topics in financial and broadly circulated news sources, including their attachment to narratives around financial markets.
Updated through February 28, 2019. Updated monthly.
ET Central Bank Omnipotence Monitor
We track the prevalence and attention of credibility attached by a wide variety of news sources to central banks and their influence on participants in financial markets.
Updated through February 28, 2019. Updated monthly.
ET Trade and Tariffs Monitor
We track the attention paid to and sentiment of a various trade and tariff-related topics in a range of news sources, especially with respect to their attachment to financial market narratives.
Updated through February 28, 2019. Updated monthly.
ET US Fiscal Policy Monitor
We track the strength and consistency of narratives about US fiscal policy, including budgets, tax policy and debt.
Updated through February 28, 2019. Updated monthly.
ET Credit Cycle Monitor
We track the strength of narratives about the credit cycle in general, plus lending, liquidity and other trends in credit markets.
Updated through February 28, 2019. Updated monthly.
In Focus
ET In Focus reports are single-issue topical analyses. They cover investment and portfolio construction topics, issues relating to the businesses of investment management and wealth management, and narrow analyses of the narrative structure and trends on specific issues, companies, sectors, countries or financial markets.
In this ET Pro In Focus note, we explore the narrative structure of ESG and SRI investing. Our question: is it finally part of the Zeitgeist, or a trend that will continue to come and go?
For fund managers and asset management executives, the fundraising question is often the most important and most inscrutable. Understanding how narratives and career risk factors interact with decision-making processes is critically important.
We introduce a new narrative measure and then put major global equity markets under the narrative microscope in Q1 2019.