It's always been difficult for investors to keep an eye on real-time economic conditions, given that most economic data points are released with a lag, but times have changed, and now that we live in an age of "big data," it's become possible to identify certain trends in real time.
For example, recent academic research suggests that counts of Internet searches for certain words or phrases can predict some macroeconomic data releases. Rebecca Hellerstein, a Senior Economist at the Federal Reserve Bank of New York, writes:
The underlying intuition is compelling. Almost 80 percent of Americans use the Internet (CIA World Factbook) and 16.4 billion Internet searches were conducted in the United States in December 2010 (comScore). If we assume some connection between what people search for and their subsequent behavior, these data have the potential to track or lead all kinds of phenomena.
We wanted to take this concept to the next level, so we created several "website indices" around common themes, and tracked traffic trends affecting these websites since the middle of March. (Contextuall used a proprietary web traffic monitoring services to compile our estimates for web traffic)
To illustrate with an example: To create an index of Airline and Travel websites, we tracked website traffic stats for sites like aa.com, delta.com, expedia.com, kayak.com and so on. In total, we currently track about 65 different airline and travel sites. We crunched the numbers, and figured out that 44 out of the 65 airline and travel websites in our index had seen rising web site traffic since March 15.
In other words, 67.7% of the websites in the Airline and Travel index had seen rising web traffic trends since the start of March (everyone seems to be planning their summer vacations). This same "website index" methodology was applied to other areas of the economy. The results are displayed in this table:
A quick glance at the table reveals some very interesting insights into the current state of the economy. First of all, websites that feature information on bankruptcy and debt consolidation have seen a drop in traffic since the middle of March. Of the 99 websites in the index, only 37 have seen a rise in traffic.
In other words, more than 62% of bankruptcy and debt consolidation websites have seen a decline in their web traffic since the middle of March -- a bullish sign for consumer sentiment? And while we're on the topic of bullish / improving consumer sentiment, it appears that the prophets of economic doom and gloom have not been taken seriously by the masses. Of the 87 "gold trading" websites that offer services to buy and sell gold, only 26 have seen a rise in traffic since the middle of March. In other words, the masses seem to have lost interest in the shiny metal as a hedge for economic collapse.
But what stood out for us are the website indices that track online brokerages and stock picks. Of the 32 online brokerage websites in our index, 24 have seen rising web traffic since the middle of March. And more than 60% of the sites that promote stock picks and financial newsletters have seen rising traffic trends. Is this early evidence that retail investors are getting back into the game? Online brokerages seem to think so. The Charles Schwab Active Trader Sentiment Survey showed 51% of individual investors that trade frequently are now bullish. Mary Ann Bartels, head to technical and market analysis at Bank of America Merrill Lynch to CNBC, said:
I think it means we will finally see retail buying.They have been absent from the market.
For your information, here are some key web traffic trends for major online brokerages, sourced from Alexa Web Rankings.
3. Interactive Brokers Group, Inc. (NASDAQ:IBKR): The Alexa global web traffic rank for the company's website (www.interactivebrokers.com/) has improved from 10,544 to 10,310 since the middle of March.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.