GO BULLS, GO RAMS!
No, I'm not talking about the Chicago Bulls, and yes, I am talking about the Saint Louis Rams, and by the time you read this, you'll know the answers to the questions I am propounding, so you can be your own market-prognosticator for the rest of the year 2000!
What the heck is he talking about!? Let me explain.
First, "Go bulls". As some of you may know, there's a market phenomenon known as the "January Effect." It turns out that over the last 50 years or so, January has been a fabulous predictor for the entire ensuing year for stock prices. According to the Stock Trader's Almanac, "Since 1950 the January barometer has predicted the annual course of the stock market with amazing accuracy. Based on whether the Standard and Poor's Composite Index is up or down in January, most years have, in essence, followed suit, that is, in 44 out of 49 times, for a 90% batting average."
Understand what we're saying here — if the S&P 500 for the month of January is higher, history tells us the market has about a 90% chance of being higher at year-end. If, on the other hand, the S&P 500 Index is lower for the month of January, then there's about a 90% probability that the market will end lower.
Trust me, there are thousands of market indicators that have been developed over the years, but few have a 90% batting average! Now, the trouble with writing newspaper articles like this is that at the time of this writing, I don't know how the S&P 500 wound up for the month of January. And, at the time of this writing, it's too close to call, and markets are so volatile anyway that we could be down considerably or up, and still have it reversed in the last few days.
My suggestion is that you listen to our broadcast during the week, or on Saturday, and we'll be talking about what happened in the month of January. (Click here for our broadcast schedule.) Find out what the S&P 500 did by month's end, and you'll have a fairly good idea of what the market may do for this year.
Now as far as the Rams are concerned, here's another piece of information that you already know, that I don't yet know. Wall Street also has a "Super Bowl Theory;" and believe it or not, it is almost as accurate as the aforementioned January barometer.
The Super Bowl Theory goes like this: if a team from the National Football Conference wins the Super Bowl, then the market will be higher around 80 and 90% of the time. Conversely, if a team from the American Conference wins the Super Bowl, then there is an 80 or 90% chance that the market will be lower. There are some exceptions to this rule, in that the original teams from the NFC such as Pittsburgh and Cleveland (who switched to the American Conference at the time of the original merger) are still classified as NFC teams for the purpose of this theory.
So the bottom line is, if the Rams win on Sunday, then the Super Bowl theory will be working for the bulls this year, and of course, if the S&P 500 showed a gain for the month of January, the January barometer is on our side.
What do I make of all this? Frankly, I'm a little more comfortable with the "January Effect" than I am with the "Super Bowl Theory" — not too surprisingly, I suppose. In any event, I'll take all the cheerleading I can get.
The bottom line on all of these theories is that they are amusing and curious; but we have to believe that inflation, interest rates, productivity, technology, corporate earnings, and let's not forget Alan Greenspan, will probably have a greater effect on the rest of the year's markets than will the January barometer or the Super Bowl Theory.
(Tom Butenhoff is a First Vice President with J. E. Liss & Company in Milwaukee. The views are his and not necessarily those of Liss Financial Services or the Job Connection/Hiring Network.)