Perhaps nothing better than Dave Portnoy’s Scrabble bag says how much the stock market has changed in the past few months. A small bag with lots of plastic letters from which the well-known US presenter wants to draw three game pieces. “T”, calls out the bearded man in his forties and lets the sack rustle. “R,” says Portnoy as he digs the next letter out of the bag. He quickly looked it up on the Internet: This can be used to put the abbreviation RTX, the short version of the listed weapons manufacturer Raytheon. “We’ll buy that,” shouts Portnoy – and many investors on the net are taking part. Mind you, Portnoy has never heard of this stock.
The index giant S&P Dow Jones now also wants to better understand what is going on in this new world of online stocks – in which often no longer analyst recommendations and balance sheet reports are decisive, but moods. That is why the pioneering US benchmark index S&P 500 has got an index brother: The alternative S&P index contains all those stocks that users on Twitter comment on particularly often and particularly positively. The tradition index, it seems, is going digital. The new stock market barometer “S&P 500 Twitter Sentiment Index” taps into the wisdom of the masses, so to speak. As a first step, S&P analyzes all tweets in which share names appear. This is now very easy, because those who tweet about stocks often use so-called cash tags. If someone writes about Apple, he types $ AAPL – first a dollar sign, then the company code.
Since the index provider has secured a direct connection to the Twitter data, it can filter the around 500 million daily tweets in real time. In a second step, an artificial intelligence assesses whether the tweet is more positive (“great”, “stunning”, “best products”) or negative (“annoying”, “broken”, “loss”). The 200 stocks with the most positive mentions make it into the S&P blend, which is reassembled once a month.
The shares of Amazon, Google parent Alphabet and chip maker Nvidia are particularly important in the new index. Tesla is not represented in the top positions, presumably because there are not only fans but also many Tesla haters on Twitter. The move by the index provider S&P shows the power that once ridiculed private investors now have in the professional financial world. Hedge funds have also been combing popular stock forums for months after buying ideas. And even the established investment bank Goldman Sachs has had to state several times that the private investor portfolios have set trends with their stock selection. At least so far.