The Rise (and fall) of Green Shoots

(green shoots breaking through the snow - photo by shellac)

The term "green shoots" has become the new buzzword associated with this recovery or hopeful signs of an upcoming recovery. Here is a quote from Ben Bernanke in March, 2009:

To get out of high rate mortgages. we are seeing progress in -- in the money market mutual funds, and in the business lending area. And I think as those green shoots begin to appear in different markets -- and as some confidence begins to come back -- that will begin the positive dynamic that brings our economy back.

If you watch CNBC you probably hear someone mention "green shoots" almost daily. Terms like this become part of the global psyche in times like this. And in some respects I think these terms and the spread of terms like this represent the collective optimism of the public.

"Financial Crisis" and "Green Shoots" Google Search Data vs. S&P 500

Below is a plot of the S&P 500 over the past year along with search volume via Google Insight for the terms "Financial Crisis" and "Green Shoots" to represent the pessimism and optimism respectively.



I was tracking this search data for "financial crisis" during the early days of the crash last year but that was before this blog so you guys missed out! Real time, it was a pretty good indicator of when that first drop was done. You can see on the plot above how the peak in searches for "financial crisis" coincide with the bottom of the first free fall last October. Since then, the pessimism as measured by searches for "financial crisis" have slowly waned. Notice there are a couple of smaller peaks in the financial crisis search volume which coincide with other bottoms in the market as it progressed.

Then you see "green shoots" appear. The first green shoots came in January of this year where you see a small spike but those green shoots of optimism were quickly snuffed out and the market proceeded lower to make new lows in early March. But then you will see the "green shoots" search volume slowly grow bigger and bigger as the market rallied. You can almost feel the optimism growing into early May and then the green shoots searches peaked. The market has traded sideways as the green shoots searches have trended down.

So it looks like the anxiety and pessimism associated with "financial crisis" has died off, but the optimism associated with "green shoots" may not be sustainable. So where does the market go from here? Not sure. This would say sideways I guess. But popular terms are always evolving so there may be a new search term that is coming up that I am not aware of yet.

Perhaps we can hope for searches for "recovery" to pick up! I will let you know (they haven't yet).

(have a great 4th of July holiday everyone, see you next week)
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