There are a lot of odd hypotheses and weird indicators when it comes to stock market performance over time. I thought it would be fun to share a few that have actually been pretty successful over time (there are, of course, thousands of others that are not as successful).
Who knows, maybe there is some subliminal fate driving the performance of the markets.
The Super Bowl Indicator
The Super Bowl indicator is the belief that if the AFC wins the Super Bowl, there will be a decline in the coming year, and if the NFC wins the Super Bowl, the market will be up.
The results of this are actually pretty surprising. Of the 22 NFC wins, the S&P 500 has had an average up year of 12.3%. Of the 14 AFC wins, the S&P 500 has had an average down year of 4.8%. I wonder why the AFC drags the markets down?
The Lipstick Indicator
This is a bearish indicator that suggests that when individuals feel uncertain about the economy, they turn to less-expensive vanities such as lipstick to improve their mood.
While not as back-tested as the Super Bowl indicator, it was shown that after the September 11 attacks, Estée Lauder Companies had a 40% increase in sales, and other companies reported the same odd, uncorrelated trend.
The Wall Street Job Indicator
This indicator makes a lot of sense — the more appealing jobs on Wall Street are, the more likely the economy is in a bubble. This indicator is usually measured by Harvard graduates that accept jobs in investment banking, private equity, and securities trading.
The indicator signals investors to exit the market if more than 30% of graduates go into these jobs, while investors should buy into the market if less than 10% of graduates take these jobs.
The results of the indicator are hard to tell: it has only given sell signals twice, and never a buy signal. However, in 1987, it gave a sell signal and the market crashed in the fall, and it gave another sell signal in the dot-com boom of 2000, and the market dropped 9.8%.
The Sports Illustrated Swimsuit Edition Cover Model Indicator
Just as it sounds, this is an indicator based on what country the cover model originates from in the Sports Illustrated Swimsuit edition. It suggests that when the model is from the United States, the S&P 500 will outperform its historical returns. When the cover model is not from the United States, the S&P 500 underperforms.
The result has been holding true with some notable exceptions. The average annual return of the S&P 500 has been 8.87% over the last 30 years. When it was an American model gracing the cover, the returns spiked to 13.9%, and with non-American models, the returns lagged at 7.2%.
However, the worst performing cover model was American Marisa Miller, who debuted in 2008, and saw the market drop 38.5%.
The Cardboard Box Indicator
The cardboard box indicator is based on the fact that just about everything in the world is shipped in a cardboard box. Basically, the more demand for cardboard boxes, the more the economy is growing because factories are shipping goods.
The opposite also holds true: the less demand, the more the economy is contracting because fewer factories are needing boxes. This weird stock market indicator was actually said to be used by Federal Reserve chairman Alan Greenspan, who would look at the indicator to gain insight into manufacturing performance.
While the results haven’t been back-tested historically, in 2008 at the height of the recession, operating revenue of many cardboard box manufacturers averaged a 50% drop. This could be an interesting indicator to follow in the future.
The Big Mac Index
This is an index for currency traders, and it looks at essentially how much a Big Mac costs in 120 countries. It was selected because it is basically the same in each country, and is sold in so many places.
It is based on the notion that the same item should cost essentially the same everywhere. As a result, if you compare the price of a Big Mac using exchange rates, you can see if a country’s currency is overvalued or undervalued at the current rate of exchange.
The result actually reflects some common trends many people are talking about for other reasons. For example, the most undervalued currency using this is the Chinese yuan — over 40% undervalued. Therefore, there might be some truth to this indicator.
Readers, what other weird or odd stock market indicators have you heard of? Do you use any of these?