Super Bowl & Other Indicators
There’s a market prediction system that has correctly forecasted the direction of the stock market for 29 out of the past 36 years.
It’s the Super Bowl indicator. When a team from the old National Football League has won the Super Bowl, stocks have often finished the year up. When an old American Football League team has won, stocks have often finished the year down.
This simple system has been accurate 80% of the time since the first Super Bowl back in 1967.
So what does the system tell us for 2003 now that the Tampa
Bay Buccaneers have won the big game? Unfortunately, it’s a little unclear
since
The point I want to make is, there are all kinds of “systems” out there for predicting stock market performance. They range from astrological planetary alignment models to wave theories the January effect and ladies hemlines. In the end, it does not appear that any of them really work.
The best model we’ve found is to understand your risk tolerance, needs, and objectives; then develop a long-term, diversified portfolio that we believe has a reasonable chance of meeting your goals. Along the way, we may make some adjustments and there may be some down periods but we still believe it’s the best way to help get you to where you want to go.
So will 2003 be the year that market turns up? We won’t know until the year is over but I believe some of the pieces are starting to fall into place. For example, on a more positive note, the housing sector has been one of just a handful of bright spots in the economy over the past year.
Another bright spot, the index of leading economics indicators (LEI) rose in December for the third straight month. The LEI is a composite index of ten economic indicators that are designed (though not guaranteed) to predict the direction of future economic activity.
Also, technology becomes obsolete relatively quickly. For example, it’s not uncommon for companies to have a policy of replacing their personal computers every three years. Now that we’re coming up on three years of weak corporate investment, there may be a pent up demand for new capital goods.
Prior to Y2K, businesses were spending like mad to get new equipment that was Y2K compliant. In many cases they found it was easier to just buy new equipment rather than upgrade existing equipment. The buildup to Y2K is now more than three years old so there’s possibility a significant amount of business equipment that is nearing the end of its lifecycle and needing replacement.
And finally, one of our money managers recently said in their bulletin to advisors like myself, “Today’s equity markets fill us with excitement. Recent declines have created opportunities as compelling as any we’ve seen in several years. From telecom equipment manufacturers to pharmaceutical firms to electric utilities, we see tremendous value in a variety of places.”
Soo—we know, investing is a very emotional activity. On the upside, we’re driven by greed. On the downside, we’re driven by fear. They key thing I want you to remember is we have to keep our emotions in check. While other people may let fear and greed drive them to make poor investing decisions, I encourage you to stay focused on your long-term goals and be confident that the economy will continue to grow, companies will start generating higher profits, and the market will respond positively.
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jpw@financial-architects.com
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