Macroeconomic and political narratives and future outcomes

Nicholas Mangee ()

Chapter 12 in Narrative Analytics and Stock Market Forecasting, 2025, pp 175-186 from Edward Elgar Publishing

Abstract: This chapter investigates nonlinearities in the forecasting relationship between major macroeconomic and political narratives and future market returns. Incorporating search intensity for topics including “Jerome Powell,” “Joe Biden,” “Donald Trump,” “Inflation,” “Interest Rates,” “Economy,” “China,” “Corporate Profits,” and “War” into an active trading scheme involving the market portfolio is shown to significantly outperform a passive buy-and-hold strategy, even after accounting for transactions costs. However, it is only when the narrative intensity is the highest that the strategy dominates a strict buy-and-hold approach. Standard OLS regressions of returns on lagged search intensity provide evidence that US presidents, the Federal Reserve Chair Powell, and interest rates display a narrative-based connection with future stock market performance.

Keywords: President Biden; President Trump; Jerome Powell; Interest rate; Inflation rate; Forecasted returns (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035357598
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