As for the stock market specifically: Last week was a wild ride for investors and traders alike. Generally speaking, it was a bad week, and while all the major indices were down a substantial amount, international markets were off nearly 4%. This week’s market commentary will have some serious comments, as well as a little bit of fun.
Let’s start with the fun stuff, which I call the offbeat indicators.
- We will start with the January effect. The short version which measures the first week of trading says 2021 will be a good year. The long version, which consists of using the entire month, says 2021 will be a bad year. For 2020, both versions had accurate predictions of a good year.
- This Sunday we will get the Super Bowl. The Super Bowl indicator for 2020 predicted a down year, since a team from the old AFL won the game. This week’s matchup consists of a team that did not exist at the time of the AFL/NFL merger against an AFL team. In my opinion, the Super Bowl indicator does not come into play if Tampa wins. As for the game itself, history tells me you don’t have to bet on Tom Brady, but is dangerous to bet against him.
- There is a fellow who uses astrology to make investment decisions. While I cannot use astrology to make investment decisions with a straight face, I cannot argue with his results.
- The final indicator is an old-time favorite…. The Hemline Indicator. Originated back in 1926 by George Taylor, an economist at the famed Wharton School. Taylor was first to make the correlation between the hemlines of women’s skirts and the stock market. He observed that women’s skirts were shorter in thriving times, so they could show off their silk stockings. When finances were tight, hemlines dropped as women hid that they couldn’t afford hosiery. Since then, market analysts have studied the correlation, and while the theory is far from foolproof, there is a proven relationship between hemlines and the economy. Besides, it’s off-beat, and off-beat things are fun to consider.
It’s time to get serious for some time. I have a couple of aspects to this – current events, and market action.
If that is the case, that is major baloney. In other words, too bad for the hedge funds.
On a general note:
The Department of Commerce reported the US economy grew at an annualized rate of 4.0 % in the fourth quarter. That was in-line with expectations. For the year, the economy contracted by 3.5%. I won’t bore you with the attribution for the economic decline in 2020. The report is interesting for the comments that I didn’t hear. In recent years, there have been many comments regarding GDP as “a backward indicator,” to which I commented all economic reports are for things that happened already.
In another report from the Commerce Department, we learned that December Household Income rose 0.6%. That was the first gain in 3 months. It also coincided with the return of enhanced unemployment benefits, and direct payments from the government from the virus relief act passed and signed into law in December. The personal savings rate also rose to 13.7%, which is far higher than the pre-pandemic rate of 8%.