At The Cash: Ben Hunt on How you can Use Narrative Data (November 26, 2025)
Do fundamentals or narratives drive market valuations? That’s the query so many are wrestling with in at present’s 24/7 algo-based platforms and AI-driven mediascape.
Full transcript under.
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About this week’s visitor:
Ben Hunt is founding father of Perscient, a agency that research how narratives and tales form markets, investing, and social habits by way of the lens of data principle, sport principle, and unstructured knowledge evaluation. His work analyzes the language, story arcs, and viral unfold of explanations in media
For more information, see:
Web site: Epsilon Idea
Masters in Enterprise (Coming quickly!)
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TRANSCRIPT:
INTRO: An excessive amount of data working by way of my mind, An excessive amount of data driving me insane
Buyers have lengthy been taught that fundamentals drive inventory costs. Income, progress, and earnings, as Benjamin Graham taught us within the quick run. The market is a voting machine, however in the long term, it’s a weighing balance.
However what if it isn’t? What if narratives are driving market valuations? I’m Barry Ritholtz, and on at present’s version of At The Cash, we’re gonna talk about methods to determine when market narratives overtake fundamentals.
To assist us unpack all of this and what it means to your portfolio, let’s herald Ben Hunt of Perscient. Ben’s agency research, narratives, and the tales that form markets investing and social habits by way of the lens of data principle. So Ben, let’s begin with a definition.
Barry Ritholtz: How do you outline a story within the context of markets and investing?
Ben Hunt: Let me outline it.
So it’s, it’s a easy definition. A story is a solution to the query why. Why did the market go up at present? Why must you purchase this inventory? Why must you promote this inventory? Why must you vote for this particular person? Any reply to the query, why is a story?
Barry Ritholtz: How do you distinguish between one thing like knowledge, which I arguably comes with a storyline connected to it and only a straight up, Hey, Bitcoin is millennium or digital gold?
Ben Hunt: How do you outline the distinction between this, I assume this inventory is affordable with a PE of 9 is a story. Yeah. Effectively, why is, why is a PE of 9 low cost? Or why is a PE of three low cost or 15 low cost? These are all tales, Barry. Any, any, any valuation, any a number of, any which means that you simply connect to numbers?
It’s a narrative. It’s a, it’s a, it’s a solution to the query. Why? Why do I name it low cost? Why do I feel you should purchase it? Why is that this fascinating? These are all why questions and the reply. Are all narratives.
Barry Ritholtz: How do you determine any specific narrative that could be driving a selected inventory or asset class or the general market? What, what instruments do do you employ to assist discern that?
Ben Hunt: Lemme begin by saying what I don’t care about. So what I don’t care about is fact or accuracy. I imply, it sounds loopy, however
Barry Ritholtz: Under no circumstances. ’trigger you’re attempting to determine what the gang believes. Yeah. Whether or not it’s true or not. Effectively, if it impacts their habits, it issues.
Ben Hunt: I’ve given up on attempting to determine what actuality is. What I’m attempting to determine is how is actuality being offered? How is it being offered to us? So what I’m in search of are parts of presentation. I’m in search of phrase alternative. I’m in search of how loud is it being offered to you, how steadily it’s being offered to you.
However most of all, I’m in search of an idea that you simply speak about in community math, and it’s referred to as density. I’m in search of how the language is linked to different phrases. In truth, these are the, the measurements you employ in community math. These are the place they, we speak about betweenness, we speak about connectedness and centrality. These are the measurements, as a result of I’m trying on the presentation, not on the actuality.
Barry Ritholtz: So how do you measure density? You, you hinted at a few of it. How loud it’s, how repetitive it’s. How do you inform when a selected narrative is starting to exert affect over costs?
Ben Hunt: Bob Schiller wrote a fairly good guide, a a pair years again referred to as “Narrative Economics,” and the takeaway from that guide is that you must take into consideration and perceive narratives in precisely the identical method.
You consider and also you perceive illness, I imply, you, you employ the identical measurements. You keep in mind once we had been speaking about COVID, it was or R-not? How, how briskly does it unfold? How shortly does it unfold? What’s the medium during which it could possibly unfold most simply? It’s precisely the identical factor right here, it’s precisely the identical factor.
We’re actually utilizing precisely the identical math. As you’d use to attempt to perceive epidemiology and the unfold of a virus. So what we’re although, as an alternative of the environment or wastewater, we’re trying on the phrases. We’re all of the phrases which are on the market when it comes to textual content of what’s being written, what’s being mentioned.
That is all unstructured knowledge, and we’re in search of the presence of sure concepts, clusters of phrases that unfold by way of that medium of media in precisely the identical method {that a} virus spreads by way of the air or by way of the water. If you happen to’re a monetary advisor otherwise you’re a market particular person of any type, and any individual comes up, why’d the market go up at present?
And you could possibly say, nicely. There are 100 completely different causes, however mainly it was simply variance. You realize? It’s simply, it’s simply, it’s simply
Barry Ritholtz: A random stroll. Individuals. Hate that reply, by the way in which.
Ben Hunt: Individuals hate that reply ’trigger it’s a crappy story. It’s a narrative. It might be true, but it surely’s not compelling. Precisely. It’s not truthy. Proper. It doesn’t, it doesn’t join with you. It’s like, nicely that’s disappointing. I, I need a story so. The tales which are mainly there to fill the time. Uh, and these are, these are usually examples the place I name ’em descriptive narratives.
They’re, they’re answering the query why, however they’re describing why one thing occurred.
Barry Ritholtz: At all times after the actual fact. By no means upfront.
Ben Hunt: At all times after the actual fact. That’s precisely proper, Barry. So what you’ll discover is that, I don’t know, it’s incomes season and who comes out first with earnings. Financials, proper. Citi and Goldman Sachs, whoever, they’ll report some good earnings. The shares will go up and afterwards, Cramer and everybody else has gotta inform you why. And so they’ll say, “Oh, I’m bullish on financials.” And so they’ll offer you a motive.
And the half life for that form of narrative, it’s every week or two.
You wanna do with that? Truthfully, is you wanna fade it. You wanna search for that to seem in your Bloomberg e-mail within the morning saying, oh, market consultants bullish on financials as a result of blah, blah, blah. And when that drum beating will get fairly loud when it’s showing in your morning e-mail. I wanna fade it.
You don’t wanna press it, you wanna fade it as a result of that is, that is simply the, the atypical enterprise of Wall Road. You’ve gotta have a solution to why, it’s virtually often simply variance or some mixture of idiosyncratic stuff. However you’ve gotta give you some blanket “Why?” And if that will get a whole lot of play, I wish to go the opposite method.
There’s one other kind of narrative although, the place I wish to press it. That’s what we name prescriptive narratives. It’s not saying, “Oh, the Fed is dovish.” It’s saying, you recognize, Muhammad Elarian will come out, or, uh, I don’t know. Trump will come out and say, “The Fed ought to be dovish.”
You see the distinction? It’s not, it’s not describing what’s already occurred. It’s attempting to. Lay the framework for what ought to occur.
Barry Ritholtz: So let’s delve into that. What kind of instruments are you utilizing to determine these narratives? Be they descriptive or prescriptive? How, how a lot lead time do you get, uh, to investigate, you recognize, this big corpus of noise and commentary and knowledge that’s produced each single day?
Ben Hunt: That is what good merchants, truthfully and buyers have all the time carried out. They’ve, they’ve, they’ve all the time made these form of assessments of the information and the tales which are occurring. So this, what we’re attempting to do is we’re attempting to externalize what good merchants, and I’ll name it short-term buyers, have all the time carried out, they’ve all the time internalized this so.
Anyone can do that. You begin in search of the phrases which are attempting to prescribe versus describe, uh, that’ll you, you’ll be able to, you’ll be able to decide this up in no matter you do. What we’re in a position to do although at present is as a result of there’s now massive knowledge is as a result of there’s massive compute, is we are able to learn every thing. People we’re all restricted in what we are able to learn, what we are able to take note of in our little nook of the world.
What’s attainable at present is to learn every thing and to investigate precisely this form of phrase alternative.
Barry Ritholtz: What kind of output do you get out of your “Massive Compute” that’s scraping every thing sifting by way of all of the language; does it determine particular phrases? Does it determine themes? I’m assuming synthetic intelligence and large knowledge analytics is a key a part of this. What does the output appear like to you?
Ben Hunt: Effectively, lemme begin with the place it begins, as a result of it’s not that the output comes from what you. Put into it and what you wanna put into it, and this must be human generated, are, nicely, what are the concepts, what are the narratives that I care about?
Right here’s why that’s necessary: Let’s say you’re a worth investor, you’ve obtained a imaginative and prescient, you recognize, you’ve obtained a view on a inventory and like all worth buyers, you suppose the market has not acknowledged the story about this inventory that I feel is absolutely necessary.
So what you’re in search of shouldn’t be, how loud is that story proper now? That story is dormant. You’re in search of that story to start out being instructed. So you’ll be able to’t begin this from asking AI, “Hey, AI, what are the distinguished tales proper now?” As a result of it could possibly solely inform you what’s being unfold proper then and there.
The best way to essentially become profitable with narratives, is to say what narrative is dormant at present, I wanna see when it begins to get found.
Its that discovery section when the market quote unquote, wakes as much as a narrative that you simply’ve been in search of the market to get up to. That’s how I discover you’ll be able to most reliably become profitable from narrative investing.
Barry Ritholtz: I get the sense we’re nonetheless within the early days of narrative investing as a key technique, no less than when it comes to utilizing AI and large knowledge. What do you see growing on this house? What’s the narrative about narrative investing?
Ben Hunt: That is an outdated concept. So for those who, for those who return and kinda take a look at your Wall Road historical past, or for those who speak to sort of traitors at present, what they’re all the time is the information that comes alongside they usually’re attempting to say, Hey, do I fade that? You realize, is that story worn out? Is it, is, is that, is it topping over or does this story have legs?
Is that this the beginning of, its unfold like a virus? It’s an outdated concept, what’s attainable at present is to quantify it. What’s attainable at present is to externalize what good merchants have internalized previously. It’s not that it’s, inventing chilly fusion or actually doing something that’s new on this planet. What it is ready to do is to make that form of evaluation, to have a look at not what actuality is, however how actuality is being offered and make it accessible over a a lot wider scope, not over simply that little space that the Good Dealer actually is aware of quite a bit about and make it accessible over much more publications and issues which are being written as a result of people can’t learn every thing actually.
I feel it’s a method of, I hate to name it democratizing investing. I actually hate that concept. Nevertheless it actually is a notion of making a brand new instrument so each investor can perceive, nicely, what are the tales which are being instructed in regards to the world at present?
Barry Ritholtz: To wrap up, expertise has enabled us to learn far more than we had been able to studying as people. In truth, the machines can learn every thing and we are able to use these machines to determine dormant narratives which may result in will increase in both a selected inventory or asset class or market. Truthful assertion?
Ben Hunt: Very reasonable. What you’re in search of is what’s new, what’s modified, as a result of when the narrative modifications, that modifications habits.
Barry Ritholtz: Fascinating stuff. I’m Barry Ritholtz. That is Bloomberg’s On the Cash.
OUTRO:
An excessive amount of data working by way of my mindAn excessive amount of data driving me insaneAn excessive amount of data working by way of my mindAn excessive amount of data driving me insane
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