Why Google trends may tell you the status of stock markets

Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.
By Sir John Templeton

As you can see from the quote, the bull market will usually end up with bubbles. Many of us are likely still remembering the crazy time periods in late 90s when the huge tech bubble was blown up or mid 2000s when the housing bubble reached its climax. We all know what ensued after the bubbles burst and how painful it was!! So after 6 years of non-stop run of the overall markets in the US, the logic question is if we are at the end of this historical bull run. Well, there are many factors that one can use to evaluate and come to a conclusion, one thing one can quickly judge is via the factor how much interest people have got in the stock market by now. It is almost always the case when a bubble really shows up that there should be a huge public interest in it and you will be getting stock tips from almost anyone you met like friends in the party, your neighbors, or even taxi drivers.  I bet none of them has happened yet. Actually you can now even check the public interest on some specific topic via Google Trends. As you can see below, there was a huge public interest in Google search on stocks back in 2007/2008 immediately prior to the market crash but we haven’t see this crazy interests yet even after 6 years of bull market. This is a good indicator that we are still not close to top yet with a huge bubble blown up in the US stock markets. That’s why I’m still bullish for stocks.

Back in late 2012 I started to become interested in the Chinesestock market and started to actively buy about one year ago.  It was a good call as it has since gone up over 40%. So is it too much and a bubble is presented in the Chinese stocks? Let’s see the Google trends. Well, do you see the difference between 2007/2008 and now? There is a long way to go for the Chinese stock to reach the previous top level, isn’t it?

Of course, don't use this as a foolproof indicator and consider it as 100% reliable. More importantly, even in a gigantic bull market, it can still correct significantly along the way. Don't be surprised by the market fluctuations.
 

Now I’m starting to get bullish on the Indian stocks. You see, the new Indian government has just aggressively engaged in the QE policy as well by cutting interest rates. The Modi government has also cut the corporate taxes from 30% to 25%, for which the investors and business confidence is improving. Together with infrastructure improvements and low oil prices, the Indian economy will likely recover in a fast pace that will be very positive to the stock market. You can buy Indian stock ETFs such as INDA or more aggressively SCIF for small caps, if you want to play with this trend.