The Narrative Index (NI)
RETIC's daily Narrative Index (NI) — measuring the market's dominant stories across 7 categories
Putting Numbers on Stories
“The market mood feels bad” is not actionable. You need to know which mood, how intense, and where it is coming from. RETIC’s Narrative Index (NI) was built to address exactly this problem. It measures and quantifies the economic narratives circulating in global media every day, providing a concrete answer to the question: “What story is driving the market right now?”
If Shiller proved the importance of narratives in theory, RETIC is attempting to translate that insight into a daily analytical tool. We would not call it a perfect instrument, but we are confident it beats flying blind.
The 7 Narrative Categories
The NI classifies market-moving narratives into seven categories. Each category receives an intensity score between 0 and 100, where higher numbers indicate stronger dominance of that narrative in media and market discourse.
1. Geopolitical Risk
Measures narratives related to war, international sanctions, trade disputes, and regional tensions. The Russia-Ukraine conflict, U.S.-China friction, and Middle East tensions all register here. When this category spikes, safe-haven flows (gold, USD, U.S. Treasuries) tend to intensify.
2. Tech Disruption
Captures narratives around AI, semiconductors, quantum computing, and other technological breakthroughs — both the optimism (“AI will transform everything”) and the fear (“AI will destroy jobs”). When tech narratives run hot, NASDAQ volatility noticeably increases.
3. Energy Transition
Covers oil price narratives, OPEC policy decisions, the green energy transition, and carbon regulation. Energy narratives are closely intertwined with inflation narratives, and the two categories frequently spike in tandem.
4. Monetary Policy
Tracks narratives about rate decisions and policy direction from major central banks — the Fed, BOJ, ECB, and others. The tension between “rate cuts are coming” and “higher for longer” is measured here. Monetary policy narratives almost always rank in the top three for market influence.
5. Inflation/Deflation
Measures the direction and intensity of price-related narratives, from “inflation is not coming down” through to “deflation could be a risk.” The gap between actual CPI data and this narrative score is particularly informative — the wider the gap, the more interesting the market dynamics.
6. Recession/Growth
Covers recession fear and growth expectations. It tracks shifts in framing such as “soft landing” versus “hard landing.” This category shows notably high correlation with consumer confidence indices, which makes sense — the story people tell themselves about the economy directly shapes their spending behavior.
7. Market Sentiment
Captures VIX-related narratives, greed/fear indicators, and emotional market commentary. “FOMO” and “panic selling” both register here. If the other six categories tell you what the story is about, Market Sentiment tells you how emotionally people are telling it.
How the NI Is Calculated
Every day, AI systems scan hundreds of articles from global financial media, major investment bank research, and social media discourse. Each piece of content is classified into the seven categories, and its narrative intensity, emotional tone, and reach are scored.
The process in summary:
- Collection: Automated ingestion of global major media outlets, wire services, and financial research
- Classification: AI categorizes each piece of content across the seven narrative categories
- Intensity scoring: Not just frequency but the strength of the tone, emotional charge, and placement (headline versus body text) are assessed
- Normalization: Scores are normalized to a 0-100 scale to enable cross-category comparison
- Composite NI: The seven categories are combined into a weighted average to produce the overall Narrative Index
How to Read the NI
High composite NI (above 70): One or a small number of narratives are overwhelmingly dominating the market conversation. Markets tend to move decisively in one direction during these periods. At the same time, an extremely high NI can be a contrarian signal — when everyone is telling the same story, a reversal may be near.
Low composite NI (below 30): No single narrative dominates; multiple stories coexist and compete. Market direction is unclear, and price action may be low-volatility or seemingly random. These are periods to watch for the emergence of a new dominant narrative.
Cross-category transitions: The real value of the NI lies in capturing the moment when dominance shifts from one category to another. When the market narrative transitions from “inflation fear” to “recession fear,” capital flows between asset classes, and new opportunities emerge. These transition points are where the NI earns its keep.
An Honest Disclaimer: The Limits of NI
The NI is a map, not a GPS. It shows you which stories are driving the market, but it does not tell you where the car will end up. A map can show you where you are; it cannot decide where you should go.
Narratives are also inherently difficult to quantify. No matter how sophisticated the AI, it cannot perfectly capture the nuances, sarcasm, context, and subtlety of human language. The NI should be understood as a useful approximation, not a precise measurement.
We publish the NI not because it is always right, but because the habit of consciously tracking narratives leads to better economic judgment. The shift in framing matters more than the precision of the numbers. Knowing which story the market is telling itself today — even if you cannot predict which story it will tell tomorrow — is a meaningful edge. Or at least, it is a meaningful reduction in confusion. And some days, reducing confusion is the best any of us can hope for.