It’s late January and Seahawks’ fans are especially interested in a certain upcoming game. As we anticipate how awesome the Super Bowl might be this year, it made me start thinking about stock market predictions. I know, right!?!
As in the world of sports, the stock market has its own set of superstitions and rituals. For example, every year on Christmas Eve and New Year’s Eve, the traders at the New York Stock Exchange sing “Wait ‘til the Sun Shines, Nelly,” a tradition that was started during the Great Depression as a way to stay optimistic about the market. Also, the U.S. stock market is closed every year on Good Friday. Although not a federal holiday, this dates back to at least 1864 and probably earlier (those records are harder to find).
Along with the traditions, there are some fun and interesting ways that people try to predict stock market performance. The Super Bowl Indicator is the theory that when a team from the old NFC (formerly the National Football League) wins the championship, the stock market will close up for the year. If a pre-merger AFC team (formerly American Football League) wins, then the stock market will close down for the year. Over the last 47 years, this indicator has been correct 35 times.* An accuracy rate of 74%. Not bad.
Another unscientific indicator is reflected in the saying, “As goes January, so goes the year.” Sometimes called the January Barometer, this describes the belief that if the market is up in January, then it will finish the year on the plus side, and vice versa. Since 1950, this indicator has been correct 81% of the time.**
While these indicators seem eerily accurate, it is important to remember the difference between correlation and causality. That is, just because two results are correlated, does not mean that one can predict the other or that they are in any way related. Take for instance, David Leinweber’s satirical study that showed by combining butter production in Bangladesh, cheese production in the US, and the sheep population in Bangladesh and the US, you could “explain” the S&P 500 performance with 99% accuracy from 1981 to 1993. We can be fairly certain that there is no causality between these events.
So, how can we predict yearly market performance? In reality, we really can’t. The good news is that we probably don’t need to. Investing for the long term has the best chance for success. Since 1871, there have been 133 rolling ten year periods. Of those 133 periods, the market has only been down four times.*** The best way to achieve your long term financial goals is still through proper asset allocation. Create a portfolio based on your risk tolerance and investment horizon and hold for the long term.
So, enjoy the game, and GO HAWKS!!!!!!!
*Blogs.wsj.com “Is It Time to Sack the “Super Bowl Indicator”?” (1/22/2014)
**Cnbc.com “As January Goes, So Goes the Year?” (1/31/2013)l
***Online.barrons.com “Ahead for Stocks: 9% Total Returns” (12/7/2013)
Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. Verity Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.
Check the background of this investment professional on FINRA’s BrokerCheck.
An Investment Advisor registered through CUSO Financial Services, L.P., Gavin has 22 years of experience as an advisor in the Puget Sound area.
“I believe every client is unique and deserving of a personalized financial plan that will help them reach their individual financial goals. Before I make any recommendations, I like to get to know my clients. By asking the right questions, and developing an honest, trusting relationship I can really get a sense of what’s going to work best for them.”
Gavin graduated from the University of Washington with a BA in Business Administration and started his financial career with US Bank in the Investment Department. Prior to joining Verity in 2006, he spent eight years with Piper Jaffray.
So what is Gavin’s vision for his dream retirement?
“My dream retirement would be absolutely worry free: financially, emotionally, and in every aspect of life. My finances would be in order so expenses for travel, luxuries, and gifts for the kids, grandkids, and great-grandkids would be taken care of. My kids would be financially sound, so I would be confident in their prosperity. This would give me the freedom to travel and play and do whatever it is I want to do.”
When Gavin’s not working, he enjoys spending time with friends and family, watching Husky football, and taking weekend trips around the Northwest.
Gavin is registered to transact securities business in the states of WA, OR, CA, AZ, FL, HI, ID, IL, MN, NM, NY and VA.
*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. Verity Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.
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