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ETF Watch Fear Index heats up

In our last post (just 3 days ago), share markets were perilously close to bear market territory (a loss of 20% or more from a market peak). Well we’re well and truly past that point now, with the ASX now down over 25%, due to: The World Health Organisation declaring Coronavirus a global pandemic; Trump…

By ETF Watch - Mar 12, 2020

In our last post (just 3 days ago), share markets were perilously close to bear market territory (a loss of 20% or more from a market peak). Well we’re well and truly past that point now, with the ASX now down over 25%, due to:

  • The World Health Organisation declaring Coronavirus a global pandemic;
  • Trump issuing a surprise travel ban on Europe to the United States;
  • General fear of Coronavirus spreading, with large events being cancelled left, right and centre.

Not even a fiscal stimulus announced by the Australian Government could stem the falls, as the bad news continues to outshine the good news. There’s no doubt now we’re in this one for the long haul.

Introducing the ETF Watch Fear Index

With doom and gloom dominating global media, most of us now considerably poorer than a few short weeks ago, and people genuinely fearful of their own health (or at least their access to toilet paper), we’re looking to lighten things up a little. Today we’re launching the ETF Watch Fear Index, to track investor sentiment using ETF Watch traffic data.

What is the ETF Watch Fear Index?

Traffic to ETF Watch has been huge since this crisis commenced, showing engaged investors are looking for options to invest during this time. We’ve noticed a spike in traffic to pages for the three Inverse Index ETFs listed on the ASX. Clearly, investors are using these to profit from market falls, or at least protect their investments from some of the falls.

If you’re not across inverse ETFs, we covered them previously. They essentially perform the opposite of the general market, meaning they go up when share markets go down and vice versa.

There’s three inverse ETFs available on the ASX. The ETF Watch Fear Index simply tracks visits to their pages on the site compared to total page views on ETF Watch. The baseline score of 100 represents the average weekly visits to these pages since ETF launched.

Results are presented below:

The results need no explanation. In the last few weeks searches for Inverse ETFs have skyrocketed. Previous to this there are some small blips for some other market corrections, eg the share market correction in late 2018 and the US/China trade war in mid 2019, but nothing like we have seen over the last couple of weeks, with searches peaking this week (with the week not yet over).

For context, Inverse ETFs average page views are about 0.3% of all ETF Watch Page views. They’ve risen to 2-5% over the last few weeks, which is still a small proportion of total page views, but with over 500 pages on the site, it is a significant proportion.

We’ll keep monitoring the ETF Watch fear index over the coming weeks and months and report regularly how it is tracking on our Twittter and Facebook accounts. Be sure to give us a follow on either platform to be kept up to date.

We’ll leave you with this quote from famous investor Jeremy Grantham (giving credit to Steve Johnson from Forager’s Twitter for posting it):

Be aware that the market does not turn when it sees light at the end of the tunnel. It turns when all looks black, but just a subtle shade less black than the day before.

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