Move over, Sharpe ratio, standard deviation and Alpha/Beta. These bizarre market indicators are attempting to help traders, too. Amusing and entertaining, seriously studied or a product of armchair financial analysts, take them with a grain of salt or gamble on their silliness to affect the market.
You’ve heard of the miniskirt, the Superbowl winner and the Sports Illustrated cover girl as indices that foretell market movements. Here are more quirky ways to predict if the economy’s headed for a boom or a bust.
1. Alligator Population
With alligator skin being used for designer bags which can cost upwards of $30,000, a recession curbs the predilection of women for luxury handbags and reduces the sales of these reptilian predators, like what happened in 2009.
2. The US Presidential Election Cycle
It’s a pattern that followed US presidents from 1950 to 2004 when the S&P 500 index showed that a president’s first year in office is the weakest for the market, lasting up to September 30 of the second year. Then, on October 1 up to December 31 of a president’s last year in office, it’s a good time for investors.
3. January and May Hypotheses
The January Effect theorizes that the market for January is an indicator of the following 11 months’ performance. S&P 500 returns since 1946 bear this out, with a positive January gaining an average of 11.1% throughout the year and a weak first month gaining only 1.3% average.
Sell in May and go away…since the market starts its downturn during May and remains weak until October. So, the advice is to divest of your stocks in May and reinvest in November.
For traders who would rather play the market instead of staying idle and leaving it to the months’ volatility, there’s always day trading which can be very profitable if played right.
4. Harvard MBA Indicator
Harvard MBA graduates get a whopping $211,000 first-year pay in hedge funds companies. Hence, if more grads take on market-sensitive jobs, such as those in investment banking and securities trading, it’s a sign that the market is nearing its top and will be going down. If fewer grads are entering this field, the stock market is not doing well, and is a signal for traders to buy.
5. Penis Size Connection
In a study of penis length correlation to economy, countries whose male population have penises with average sizes have better-performing markets than those with the longest and shortest male organs. The explanation lies in the testosterone levels as a measure of risk-taking, and moderate risks deliver safer and more stable markets.
The doctoral student who did the study cautions against using his discovery for stock market trading, claiming that the theory “remains an intriguing statistical artefact.”
6. The Hot Waitress
Check out the waitresses in restaurants. If they’re hot, chances are the economy is weak. The principles behind this belief are two-fold. Hot women prefer more glamorous jobs like modeling. But in an economic slump, such jobs are hard to come by, and the women have to settle for waitressing. Employers, too, hire them to boost a restaurant’s appeal. As the market improves, restaurants are left with not-so-hot servers.
7. The Boston Snow Index
Snowfall on Christmas eve in Boston is a predictor for a positive economy. In December 1995, snowfall was recorded at 11.1 inches. By 1996, S&P500 and the Dow saw increases of more than 20%. The Boston Snow index has no scientific basis though, prompting NY Yankees fans to call it the BS Index.
8. Google Trend Index
The volume of a search on Google can be used to determine retail investing opportunities with Google Trend. As a tool, it shows the volume of the words being searched and their geographic concentration. When search phrases such as “stocks to buy” increase in volume, it’s a good sign for risk-on stocks as traders will be buying them. On the other hand, search for phrases like “how to short-sell” means that the market is not performing as well.
9. Men’s Underwear Index
Men don’t give as much attention to their underwear as they do their video games and cars. So, when the economy is weak, underwear is the last thing they’ll have on their shopping list. Former Federal Reserve chairman Alan Greenspan popularized this hypothesis, saying that sales of men’s underwear remain steady but go down when the economy declines, as this piece of clothing is more of a necessity than a luxury.
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