Which Market Predictions Are Right In 2009?
October 8, 2009 by Tisa Silver
Filed under Finance
Have the Super Bowl winners and women’s hemlines predicted the stock market’s performance correctly this year? Let’s check up on some popular market anomalies and see how they have turned out so far in 2009.
Photo by bb_matt, courtesy of flickr
The Super Bowl Indicator – Correct. The year isn’t over yet, but so far the rule looks good. But, it would look equally as good if the Cardinals had beat the Steelers. Both Super Bowl competitors were old NFL teams. In fact, all four playoff teams were old NFL teams. As the rule goes, a victory from an old NFL team is supposed to indicate a bull market, while an old AFL team victory would indicate a bear market.
The Hemline Indicator - Questionable. Short skirts dominated the runways during the summer and appear to be continuing their run into the fall. In early 2009, long dresses were everywhere. It seems when times are good, skin is in and when times are bad, people cover up. Unfortunately, fashion seems to react to sentiment not predict it, making this supposed rule a lagging indicator.
Sell in May and go away – Way off. This theory suggests investors sell out at the end of April and buy back into the market after October. We are only eight days into the month, but doing the exact opposite may end up being the more profitable strategy for 2009.
The January effect - Flunked miserably. This theory suggests that small cap stocks outperform the market during the first three weeks of January. According to Investopedia, during the first three weeks of January, the S&P 500 fell 8.3 percent and the Vanguard Mid Cap ETF fell 7.36 percent. Vanguard’s Small Cap ETF posted the worst performance of the three, losing over 10 percent of its value.
There are a ton of rules and indicators such as the ones mentioned above, but there is not a lot of support for any of them. If you find a relationship between stock market performance and some random event or thing, how can you tell if there really is a relationship?
If I knew the answer to that question, I’d be trading not blogging! :)
