There are many different ways to invest in the stock market—some people prefer to buy and hold, while others trade stocks on a more frequent basis. Day traders and other stock investors have a lot of different indicators to measure performance and provide insights on when and how to invest.
There are also a lot of weird indicators and other odd hypotheses when it comes to stock market performance over time. I thought it would be fun to share a few that have actually been pretty successful over time (there are, of course, thousands of others that are not as successful).
Who knows, maybe there is some subliminal fate driving the performance of the markets.
1. The Super Bowl Indicator
The Super Bowl indicator is the belief that if the AFC (American Football Conference) wins the Super Bowl, there will be a decline in the coming year (as measured by the Dow Jones Industrial Average performance), and if the NFC (National Football Conference) wins the Super Bowl, the market will be up.
The results of this are actually pretty surprising. Since the time it was first introduced back in 1978, it has been mostly right. As of the 2022 Super Bowl, the indicator has been right 41 out of 55 games.
The Super Bowl is usually in January or February, so some believe the timing of it can be an indication of overall market performance throughout the year.
2. The Lipstick Indicator
This is a bearish indicator, first introduced by Leonard Lauder—the chairman of cosmetic company Estee Lauder. It suggests an inverse correlation between cosmetic sales and overall economic health. The thinking is that when individuals feel uncertain about the economy, they turn to less-expensive vanities such as lipstick rather than more expensive items like dresses and handbags.
While not as back-tested like the Super Bowl indicator, it was shown that after the September 11 attacks, Estée Lauder Companies had a 40% increase in sales, and other companies reported the same odd, uncorrelated trend.
3. The Wall Street Job Indicator
This indicator makes a lot of sense. The more appealing jobs on Wall Street are, the more likely the economy is in a bubble. This indicator is usually measured by Harvard graduates that accept jobs in investment banking, private equity, and securities trading.
The indicator signals investors to exit the market if more than 30% of graduates go into these jobs, while investors should buy into the market if less than 10% of graduates take these jobs.
The results are hard to decipher. It has only given sell signals twice, and never a buy signal.
However, in 1987, it gave a sell signal and the market crashed in the fall, and it gave another sell signal in the dot-com boom of 2000 when the market dropped 9.8%.
4. The Sports Illustrated Swimsuit Edition Cover Model Indicator
Just as it sounds, this is an indicator based on what country the cover model originates from in the Sports Illustrated Swimsuit edition. It suggests that when the model is from the U.S the S&P 500 will outperform its historical returns versus when the model is not—the S&P 500 underperforms.
The result has been holding true with some notable exceptions. The average annual return of the S&P 500 has been 10.7% over the last 30 years. When it was an American model gracing the cover, the returns spiked to 13.9%, and with non-American models, the returns lagged at 7.2%.
However, the worst performing cover model was American Marisa Miller, who debuted in 2008 and oversaw a market drop of 38.5%. The Sports Illustrated Swimsuit Edition Cover Model Indicator is getting harder to track these days, since SI now usually has multiple Swimsuit Edition cover models each year.
5. The Cardboard Box Indicator
The cardboard box indicator is based on the fact that just about everything in the world is shipped in a cardboard box. Basically, the more demand for cardboard boxes, the more the economy is growing because factories are shipping goods.
The opposite also holds true. The less demand, the more the economy is contracting because fewer factories are needing boxes. This weird stock market indicator was actually said to be used by Federal Reserve chairman Alan Greenspan, who would look at the indicator to gain insight into manufacturing performance.
While the results haven’t been back-tested historically, in 2008 at the height of the recession, operating revenue of many cardboard box manufacturers averaged a 50% drop. This could be an interesting indicator to follow in the future.
6. The Big Mac Index
This is an index for currency traders, and it looks at essentially how much a Big Mac costs in 120 countries. It was selected because it is basically the same in each country, and is sold in so many places.
It is based on the notion that the same item should cost essentially the same everywhere. As a result, if you compare the price of a Big Mac using exchange rates, you can see if a country’s currency is overvalued or undervalued at the current rate of exchange. The Economist first came up with the Big Mac Index in 1986 and maintains an interactive index on their website.
The Bottom Line
There are many different ways to invest in the stock market, and many paths to success. While it’s fun to look at weird stock market indicators, keep in mind that most of these “trends” are really just coincidences and not something to base a serious investment strategy on. Still, it won’t keep me from rooting for the NFC in the next Super Bowl!
What other weird or odd stock market indicators have you heard of? Do you use any of these?
