Opening Cross: Economic Uncertainty Raises Value of ‘Insight’

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Max Bowie, editor, Inside Market Data

Bloomberg’s latest initiative, a research service called Bloomberg Industries, couldn’t be better-timed. The service—described on the vendor’s website as “our major Data Products launch for 2011”—provides industry- and company-level research and analysis at a time when firms and investors are in dire need of tools that consolidate relevant information and make sense of it.

Industries provides something that increasingly matters more than data alone—insight that adds intelligence to information. It’s in the same vein as Bloomberg View, the opinion section of Bloomberg News that the vendor introduced in May—to provide a clear view and context that cuts through the plethora of often-conflicting news to deliver clear insight.

The current economic environment is creating even more demand for tools that give traders and investors an edge through insight and commentary. According to recent surveys, market confidence is either falling or rising—depending on exactly what business you’re in—with investors caught in the middle, trying to understand the dynamics of a market that may be completely new to them, and where data alone is no use without the tools to interpret it correctly.

NYSE Euronext last week released the results of a survey of European investors, conducted between December and April, which shows an overall positive outlook for investors in stocks, bonds, exchange-traded funds and other products. However, a poll announced last week by investment management consultancy Investit shows that senior investment managers are less confident of the business environment now than they were at the start of this year.

Underlying this fall in confidence are concerns over sovereign debt—not just the beleaguered Greek economy, but also in the US, which Moody’s last week placed on review, citing the “rising possibility” that the government would not raise the country’s debt ceiling in time to prevent a default—and that recent economic rallies may be a respite between symptoms rather than a cure.

This uncertainty is causing private and institutional investors to change their investing habits. In its first-half trading statement, Börse Berlin noted that equities trading—usually the staple of private investors—had declined by 7.6 percent as a share of the exchange’s business, while the number of bond trades grew by 26 percent, which the exchange attributed to investors becoming increasingly fearful of the Greek debt crisis and the potential for global inflation. In terms of other asset classes, mobile trading technology vendor Market Simplified reported a 350 percent increase in foreign exchange trading on its platform over the past year. Meanwhile, a survey of investor education practices released last month by technical analysis software vendor Recognia shows that active traders who manage their own money are increasingly looking for effective tools to educate them about new trading strategies and risk management.

Ironically, according to Investit, “the near-universal business response” to the changing climate is for firms to look for opportunities to expand into new markets, while trying to understand which products are profitable or not—both of which require a keen understanding of markets and products that may be new to the individuals responsible.

On the positive side, a recent report from international law firm Allen & Overy claims that a rise in hostile merger and acquisitions activity signals growing market confidence. Actually, this isn’t at odds with the uncertainty experienced in other areas: Companies are taking advantage of uncertainty in some markets to snap up strategic acquisitions, while also seeking out diverse revenue streams that can protect them through any prolonged economic woes. And to find the potential acquisitions that will deliver the best returns, you need—you’ve guessed it—tools that provide the best research and insight.

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