In a sign of just how bewildering a pandemic of this magnitude has been for investors, they’re turning to social media and transport data to see if citizens are taking the threat of the virus seriously.
They’re looking at Instagram posts, Twitter and other platforms, and seeing the public enjoying meals at restaurants in Swedish ski resorts, concerts in the U.K. when the government called for social distancing and commuters packed into public transport despite lockdowns. They’re also examining traffic and GPS data for insight into whether people are staying at home.
Because if they aren’t, traders may need to adjust their portfolio. The rate of infections remains one of the most important figures to monitor, and markets are unlikely to calm down until there’s proof that the virus has been reigned in. In the absence of any gauges to help forecast when that will happen, investors are getting creative.
“People are still socializing, you can see it all over Instagram," said Saed Abukarsh, the co-founder of Dubai-based hedge fund Ark Capital Management. “They’re supposed to be isolating themselves, but they’re not. It’s a risk, because the more they flout the rules, the higher the risk of contagion, resulting in more economic pain, which we need to hedge against."
One treasury manager in the United Arab Emirates says he changed the company’s defensive plays after seeing Instagram posts of people out and about -- some of them with the caption ‘Happy coronavacation.’ The number of confirmed cases in the UAE has since doubled.
Slow to Act
Andreas Steno Larsen, a foreign-currency strategist at Nordea Bank Abp, is using traffic data to see if the public are staying at home, and GPS data such as TomTom to see how effective curfews are. Earlier this month, there was a huge difference between Paris and Londoan in traffic flows, but now congestion is down in the U.K.’s capital, he said.
Larsen thinks both Britain and Sweden were slow to curb the spread of the virus. That’s one reason why bearishness on the British pound over the next month is near the highest since the Brexit referendum in 2016, according to an options gauge, even after the prime minister approved a ban on all unnecessary movement of people for at least three weeks. Some traders say the damage is already done.
Similar options contracts for the Swedish krona versus the euro show that pessimism over the currency is close to the highest in more than a decade.
For now, traders are adapting to a rapidly changing market as the spread of the virus threatens to plunge the world’s economies into a deep recession. In spite of all the support measures from central banks and governments to safeguard their economies, investors will continue to look for evidence of a slowdown in new cases before letting their guards down.
Using social media and other unconventional data is one thing, but doing it on a large scale is another, according to Viraj Patel, a currency and macro strategist at artificial intelligence firm Arkera Inc.
“From first-hand experience, it’s no easy task to turn these proxy data sets into critical and meaningful market leading indicators," said London-based Patel. “But it will become more commonly used across the industry once the technologies are refined and widespread."
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.