I’ve been chastised for not offering a prediction for this year’s market. In fact, I have offered several, but only to subscribers. For visitors to my free site, however, there’s no time like the present, so here you go:
The market will present some excellent buying opportunities in volatile months, but will rise overall for the year. I’ll be looking for buy times as we go through the year, and alerting readers here.
The U.S. economy has avoided recession this far, despite the housing market troubles of last year. Earnings are slowing, but not cratering, and we knew that they would slow anyway, so this comes as no shock. Finally, so far the Ben Bernanke Fed has done a remarkable job of managing the money supply. I have confidence in their future ability to do so. We may not get rate cuts as soon as some would like, but we’ll get them at the right time.
Now, here are two other reasons to think the market will do well, presented with tongue firmly in cheek.
Thursday was the first day of February, so the inevitable references to the Stock Trader’s Almanac and its January Barometer were everywhere.
According to the overhyped almanac, the course of January determines the course of the year. Because January ended up, we should be in for a swell year. The problem with the oft-cited study is that the stock market gains in most years anyway. January’s having done well does traders no good whatsoever in choosing when to get in and out during the year.
To me, the January barometer is a measure without meaning, often correct but with no actionable consequences. The odds favor the market rising every year. The January Barometer is such a long-term indicator that if it helps you then you’re probably just always invested anyway, as well you should be.
Show me a jumper-in and jumper-out who says he’s beaten the market over time, and I’ll show you somebody who’s using the wrong index to judge, for instance, the Lehman Brothers Aggregate Bond index perhaps?
My grousing notwithstanding, for those looking to add one more line to the bullish list, here it is. The January Barometer says we’ll have an up year.
Super Bowl Indicator
Are you all set? Do you have your beer, soft drinks, chips, and dips? If not, there’s still time. Super Bowl XLI kicks off at Dolphin Stadium in South Florida at 6:25 p.m. this Sunday. The Indianapolis Colts (15-4) coached by Tony Dungy will face the Chicago Bears (15-3) coached by Lovie Smith.
Here in Denver, where I’ll be watching the event, loyalties are divided. The Broncos won’t be there, after all, so there’s not too much excitement. If I had to judge by word on the street, though, I’d say Colorado tilts in favor of the Colts.
As for this site’s fans, we’ve already won. “How’s that?” you ask. We’ve won because we’re bullish on the stock market, and the Super Bowl indicator already says we’re right.
The indicator says that a Super Bowl victory by an old NFL team means a gain for the Dow in the following year. Both the Colts and the Bears are old teams, so we’re guaranteed to get a bullish reading this year.
You’re undoubtedly rolling your eyes by now, but look at the record. In the past 40 Super Bowls, it correctly called 31 markets, got five wrong, and was inconclusive four times. Altogether, that’s a 78% accuracy. Take out the inconclusives and it’s an 89% accuracy, better than any publicly-tracked market expert, including Yours Truly.
About those inconclusives. In five of the last seven Super Bowls, one team was either formed after the 1970 AFL-NFL merger, or changed its name after being relocated. The indicator didn’t work in four of those five years, but it had an excuse.
This year, there’s no such ambiguity. Both teams are old NFL teams. In the six previous times that’s been the case, the Dow has gone up with an average gain of 18%.
So, choose your team and have a good time, but remember that you’re already a winner. The Dow’s sure to go higher this year. The Stock Trader’s Almanac says so and now the Super Bowl indicator says so, too.
DISCLOSURE: I don’t really believe in either the Super Bowl indicator or the Stock Trader’s Almanac, but I do believe the Dow will rise this year.
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