Unusual economic indicators
How to predict a recession with the Super Bowl
Everybody knows you can’t predict the future, especially when it comes to the stock market. It is, however, human nature to try anyway. Buying just before earnings season, selling after an executive did something stupid (Elon Musk) - sometimes these strategies are successful, and other times not so much. Today we’ll explore two indicators that have weirdly been fairly successful: The Super Bowl, and the Chinese Zodiac calendar.
The Super Bowl indicator
This theory, created by Leonard Koppett in 1978, says that if a team from the American Football Conference (AFC) wins the Super Bowl, the stock market will decline. If a team from the National Football Conference (NFC) wins the Super Bowl, the stock market (S&P 500) will rise.
Before 1978, the prediction had been correct 100% of the time. Between 1978 and 2000, the prediction came true 74% of the time - and between 1978 and 2022, only 59% of the time. The theory also included the Pittsburgh Steelers as an NFC team (they switched to the AFC in 1970). If we treat them as an AFC team, the success ratio goes all the way down to 50%. Obviously, there is no actual economic basis behind the prediction, and plenty of things affect the stock market more strongly than a football game.
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The Year of the Dragon
The Chinese zodiac calendar assigns an animal to each year in a cycle of 12 years. Traditionally, the Year of the Dragon is associated with prosperity and success, so much so that many people in China specifically schedule important things like buying a house or getting married within the Year of the Dragon.
Over the years, this has led to predictions of stock market performance based on which animal’s year it is. Looking at the average growth per year of the S&P 500, SEE Index (China’s stock market) and China’s real and nominal GDP growth all from 1900-2023, the Year of the Dragon is actually the second best-performing animal with an average growth of 13%, behind the Pig with over 15%. The Year of the Snake is the worst-performing animal with a growth of -2% - perhaps surprising, considering 2008 (Global Financial Crisis) and 2020 (Start of COVID pandemic) were both years of the Rat. The next Dragon year is in 2024: here’s to hoping the tradition of a successful year comes true!
Do you have any other unusual economic indicators that you are SURE are infallible? Let us know in the comments!
See you on Wednesday for charts on the shift to renewable energy.
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Full Moon (white circle dots) tends to generate more volatility in addition the market tends to go up and down at specific rates (parallel cyan lines). Check it out at: https://drive.google.com/file/d/1ZHBO7U2uXAgqCK6W6h6Z6Gx_QxKu4b6B/view?usp=sharing
loved it !