The Drudge Report, with its 30,000,000 page views per day, is one of the most widely followed news sources on the web.  News junkies visit the site on a regular basis to get their daily link fix, while those in the media world — from the major networks and newspapers to independent journalists — check it multiple times a day.  While political stories receive the majority of the site’s links, it’s whatever the site’s founder Matt Drudge believes to be the most important topic of the day that gets the main headline at the top of the page.

The Drudge Report is not a financial news site, so whenever a financial news story grabs the Drudge headline, it means that the story has crossed over from just a financial news story to the mainstream.  And when a financial news story crosses over into the mainstream media, it means that those that don’t follow the market on a regular basis are suddenly following the market.  This usually occurs when the market (or economy, etc.) is going down and not up.

Because of its reach to the masses, we view financial headlines on Drudge as a contrarian indicator.  When financial stories dominate the front-page headlines on a regular basis, we’re probably getting close to an inflection point for the The Drudge Report, with its 30,000,000 page views per day, is one of the most widely followed news sources on the web.  News junkies visit the site on a regular basis to get their daily link fix, while those in the media world — from the major networks and newspapers to independent journalists — check it multiple times a day.  While political stories receive the majority of the site’s links, it’s whatever the site’s founder Matt Drudge believes to be the most important topic of the day that gets the main headline at the top of the page.

The Drudge Report is not a financial news site, so whenever a financial news story grabs the Drudge headline, it means that the story has crossed over from just a financial news story to the mainstream.  And when a financial news story crosses over into the mainstream media, it means that those that don’t follow the market on a regular basis are suddenly following the market.  This usually occurs when the market (or economy, etc.) is going down and not up.

Because of its reach to the masses, we view financial headlines on Drudge as a contrarian indicator.  When financial stories dominate the front-page headlines on a regular basis, we’re probably getting close to an inflection point for the market, whether it’s a bottom or a top.  When a large number of negative financial headlines are showing up on Drudge on a regular basis, it suggests that excess negativity is probably priced into the market.  Conversely, if a large number of financial headlines are showing up when the market is soaring, it suggests that good news is probably priced in.

In order to quantify this sentiment, we tracked every Drudge headline at 9 AM, noon and 4 PM on daily basis going back to 2003 and tallied the number of stories that were finance related using the Drudge Report’s massive archives service.  We essentially wanted to see how often a financial news story was a front-page headline and not just confined to the Money section.  (We counted any story that involved the economy or any asset class as a finance related headline.)

Below is a chart showing the number of days in which there was a finance related headline on Drudge over a rolling 50-day period since mid-2003.  At our starting point, the market was in the early stages of the 2002-2007 bull market.  Unsurprisingly, the number of finance related headlines hit its first peak right around the time that the market made its financial crisis lows in early 2009.  The max reading of 21 days out of 50 with financial related headlines on Drudge came on February 27th, 2009, which was just 10 days before the S&P 500’s bear market low on March 9th.  The number of financial headlines on Drudge then cratered all the way down to zero as the market and the economy recovered from the bear market, but then it started to pick up steadily once again in early 2010 as the crisis moved from our shores over to Europe.

During 2011’s version of the Euro Crisis and the US debt downgrade, the Drudge Headline Indicator maxed out at a new record high of 22 in mid-August, breaking the high seen during the depths of the US financial crisis.  It made a new high again in June 2012 and then went through a multi-year lull as the S&P 500 surged in 2013 and 2014.  We didn’t see a spike again until mid-2015 during the Greek debt crisis and the peak of the Chinese equity bubble that burst in the second half of 2015.

Following the mid-2015 spike, financial headlines on Drudge didn’t reach 20 over any 50-day period until this past December when the S&P 500 experienced a 19% correction (just barely missing the 20% decline threshold that would have marked a new bear market).  As you can see in the charts, the recent peak for our Drudge reading occurred basically to the day that the correction low was made for the S&P 500 at the end of 2018.  Since that market low, financial headlines on Drudge have been much more muted as the stock market has posted double-digit percentage gains through mid-year 2019 where we currently sit.  At this point in time, our Drudge reading is neither excessively bearish or bullish, but it’s something we always like to keep a close eye on.

One final observation is that Drudge financial headlines were few and far between prior to the Financial Crisis in 2008 and 2009, but they have shown up much more frequently over the past ten years.  The fact that we now see a much higher amount of financial headlines on what is mostly a political website represents a key shift in society, in our opinion, stemming from the collapse we saw in 2008.  Everyday citizens now pay more attention to the economy and the markets than they did before, and sentiment on the topic is usually more negative than positive.

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