Investors are looking for soft data for direction in the midst of trading policy chaos

Whipsawing as trading policy forces some investors to be more inclined to anecdotal data to help them make decisions, because the official concrete indicators become outdated too quickly in the changing environment quickly.

Dramatic policy shift, such as the announcement of US President Donald Trump last month, means what is called hard indicators, including quantitative metrics such as unemployment rates, employment creation, retail sales and prices, limited to being used when they are released.

It encourages investors to increasingly take a signal from the anecdotal sentiment or “soft data” survey, which may be more subjective but offers more recent conditions about conditions.

“Lack of real information in real-time means we have to rely on what is said soft data to us,” said Jack Ablin, Chief Investment Officer at Cresset Capital.

He said he was preparing a client presentation based on almost all of the data on consumer sentiment, investor views and the level of business trust. “I can’t think of too much environment like this.”

Trump’s tariff plan, was first announced on April 2 and modified, was expanded and canceled many times in a few weeks since then, shaking business as usual on Wall Street.
While hard data about work and consumer prices shows that the economy remains tough, soft data describes a different picture of consumer trust and the level of business activities in both services and manufacturing.

Investors look at the two data sources, although at the time of uncertainty that is tilted for the sake of soft data.

“This is all about soft data: if consumers do not feel good, they will not spend and then the economy will suffer,” said Jason Britton, Head of Reflexology Asset Management Investment, adding that consumer sentiment surveys were published “in almost real time” rather than with pauses.

“If you want to know what the future is like, then you want to see soft data,” said Malcolm Polley, Head of Investment Strategy for Stratos Investment Management. But he added, “Don’t pay attention to him in a vacuum or just a noise.”

Playing catchup

Signals sent by hard and soft data can be distorted and sometimes fail to paint an accurate picture of what is in front. In 2022, when a consumer sentiment survey showed a falling belief, the estimated recession was abundant.

But the strict labor market and a stronger household balance means that consumers continue to spend and no recession is realized.

Liz Ann Sonders, head of the investment strategy at Charles Schwab, expects hard data this time to confirm the deterioration in conditions but records that there will be a lot of noise to be cut.

“We will see a lot of funky data that you must go through with a fine -toothed comb,” he said.

Some market participants are looking for soft data outside of traditional surveys.

“During this period of uncertainty like this, every event or data point has a huge influence on the price and causes volatility,” said Campbell Harvey, a financial professor at the Fuqua School of Business Duke University. “So that’s why you have to surpass and surpass” in pursuing new data input.

Harvey pays more attention to alternative indicators, as offered by Polymarkets, the prediction market supported by blockchain.

Polymarket users bet about everything from the possibility of recession to the price of eggs. Harvey said this should be noted because believing such bets made by people based on their conversations with business partners, suppliers, and customers.

Mike Reynolds, Vice President of Investment Research in Glenmede, is considering new metrics, such as the number of foreign travelers visiting the United States, when he tries to measure the impact of tariffs.

In March, foreign expenditure for trips to the United States fell $ 1.3 billion, the Department of Trade’s Economic Analysis Bureau said on Tuesday, the biggest decline was since Pandemi.

“We do think that we need to change our approach and be creative in our approach to data to get insight into what happens,” Reynolds said. “We want to see anything that will give us excellence, because in this uncertainty doing anything – or not at all – risk.”

Do it correctly

To be sure, some still prefer hard data.

“I was in the 35 -year -old investment business and I learned to ignore survey data and viewed actual data,” Minister of Finance Scott Besent said during a press conference last week.

Chairman of Federal Reserve Jerome Powell said that in April the bank “observed this tension between hard and soft data.” The Fed announced his tariff decision on Wednesday.

Some warn over over-reliance on soft data.

“The survey takes more feelings than the action (so) they may not be in accordance with the same speed with the same speed as hard data,” said Jan Hatzius, head of economist at Goldman Sachs in an interview.

Soft data is also more likely to send fake alarm, as happened in 2022, Hatzius added.

“Many people say, this is a recession,” he said. “We do not.”
Source: Reuters