Although Donald Trump’s victory in the presidential elections came as a shock to pollsters, “expert” analysts, and media pundits, it was not as surprising to the social media collective.
For several days, even weeks, numerous social media analytic companies have reported that the sentiment of people measured across social media towards the two candidates has skewed towards Trump. Going forward, pollsters and analysts would be wise to pay more attention to the sentiment of the social collective, as it can provide valuable insight and account for factors missed by traditional methods, which suffer from limitations including response bias and low incentive for truth telling. In contrast, opinions on social media platforms are made voluntarily, and can be much more predictive of the population.
While the Buzz Social Media Insights Index (BUZZ), tracked by the Sprott Buzz Social Media Insights ETF (NYSE:BUZ) does not monitor or analyze sentiment on the elections, it does however capture the sentiment that people exhibit towards stocks and investments, which is ultimately related to their views on such events. On the trading day following the election, BUZZ outperformed not only the S&P 500 Index, but also price momentum strategies such as the iShares Edge MSCI USA Momentum Factor ETF (NYSE:MTUM).
In particular, biotechnology stocks rallied sharply with the defeat of Hillary Clinton, who has been critical of drug pricing policies and viewed as a negative factor for the industry. BUZZ had been overweight biotechnology stocks, reflecting the positive social momentum towards the industry leading into the elections.