Tahoe Market Pulse: Patriots’ Super Bowl win — bad news for stocks?
Because the New England Patriots won the Super Bowl, that bodes poorly for stocks.
Let me explain. The Super Bowl Indicator says that when a team from the National Football Conference (NFC) wins then it will be an up year for stocks, but if a team from the American Football Conference (AFC) wins then stocks will fall.
In the last 50 years this indicator has been 80-percent accurate. Since 2000 it has been 70-percent accurate. Would you trade this data?
Because the indicator deals with the Super Bowl, most investors would way it is irrelevant. But what if the indicator isn’t based on sports?
Analyst Jay Kaeppel (jayonthemarkets.com) offers two interesting indicators. The first examines three days a month to avoid stocks. Let’s call the last trading day of the month “M1,” the second to the last day of the month “M2,” etc.
The days to avoid are M5, M6 and M7. Dating back to December 1933, if you only invested in the Dow on days M5, M6, and M7 your portfolio would have declined a brutal 80 percent. Would you trade this indicator or is it a statistical fluke?
Since this is 2017 let’s look at years that end in “7.” Starting in 1889 if you invested in the market only in the months of February, September, and October during years that ended in seven then you would have lost 84 percent. Since this is February does it make you want to sell or is this another statistical fluke?
January was an up month so the “January Indicator,” developed by Jeffrey Hirsch, points to higher stock prices for the rest of 2017.
Simply put, the indicator says, “as January goes, so goes the rest of the year.” Dating back to 1943, after a January advance the market continued to rise from February through December 85 percent of the time. Is that good news for 2017 or a meaningless statistic?
Mark Twain said, “There are three kinds of lies: lies, damned lies, and statistics.” Stock investors hear a lot of statistics that are designed to make a bullish or bearish case.
Beware. Only trust those that make sense (the Super Bowl indicator doesn’t pass this test) and have a lot of data points. Even then, it’s hard to tell what’s worthy of your attention.
David Vomund is an Incline Village-based fee-only money manager. Information is found at http://www.VomundInvestments.com or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.
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