There’s no shortage of statistical analysis on Wall Street and while some of the research sheds light on patterns worth paying attention to, that’s not always the case. In the early 1990s, for example, a professor at the University of California-Berkeley School of Business noted an amazing 99% correlation between the performance of the S&P 500 over a 10-year period and the combination of cheese production in the US, butter production in Bangladesh, and sheep population in Bangladesh. The cheese-butter-sheep/S&P 500 relationship went bust in 1994.
A predictor with a bit more staying power is a National League win in the World Series. Last night the National League’s San Francisco Giants clinched the pennant with a 3-2 win over the American League’s Kansas City Royals. Historically, the S&P 500 has risen 90% of the time in QTR 4 when that happens. And since 1950, the calendar year following National League wins have been bullish for the Dow Industrial Average 83.9% of the time. A few years ago Capital IQ determined that the number of games required to wrap up the World Series is correlated with the S&P 500’s return the following year with fewer games yielding better performances. This year, the Giants-Royals battled to a seventh and final game.
It’s miserable being an investment adviser and a Boston Red Sox fan. True, the Red Sox have won eight titles in World Series history, but the first Boston title of my life time didn’t occur until I was in my 40s! When they do win, it usually doesn’t bode well for the stock market. Wall Street has been bearish in years following a Red Sox triumph a staggering 62.5% of the time. Even worse, the Sox hold the record for the biggest S&P 500 decline after a World Series victory: -38.9% in 2008. (The Boston Red Sox play in the American League.)
♦ Please note that my readings will change without notice, so please don’t buy or sell solely based on anything you read in this blo