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Say Calendar Indicators

Stocks will rise this year, according to the calendar indicators.

First, this year’s Super Bowl match Khalil Mack Jersey up is very favorable for investors. Both the Pittsburgh Steelers and the Green Bay Packers are old NFL teams, meaning they were part of the NFL before the league merged with the AFL. Super Bowl victories by old NFL teams lead to full year gains for stocks nearly 80% of the time.

There’s even more good news. According to Capital IQ, the S 500 has risen by an average of 26% when the Steelers win the Super Bowl. The index has an average return of 23% when the Packers win. The average market return is also positive when either team loses in the Super Bowl.

Then there is the January Barometer. Jeffrey Hirsch states in John Matuszak Jersey the Stock Trader’s Almanac (Wiley, 2010) that “as the S 500 goes in January, so goes the year.” His calculations say that the indicator has only registered seven “major errors” since 1950. The last were 2009 and 2010, when the S 500 fell in January, but posted gains for the full year. As of Thursday’s close, the S 500 was up about 3% month to date.

Finally, I would be remiss if I did not bring up the Presidential cycle. The third year of a presidential term is bullish. Sam Stovall at Standard Poor’s calculates that the S 500 has an average 17% gain in the third year of a presidential cycle. (His data dates back to 1945.)

December personal income and spending will be the week’s first economic data, with a Monday morning release. Tuesday features the January ISM manufacturing index and December construction spending. ADP’s January employment report, which calculates only the change in private jobs, will be published on Wednesday. Thursday features the January ISM services index, December factory orders and the first look at fourth quarter productivity. January jobs data, including the unemployment rate and change in nonfarm payrolls (both private and government), will be released by the Labor Department on Friday.

Atlanta Federal Reserve Bank President Dennis Lockhart will speak publicly on Monday. Federal Reserve Chairman Ben Bernanke and Minneapolis Federal Reserve President Narayana Kocherlakota will speak on Thursday.

Many of you are now asking the obvious question: Does any of this really work?

The numbers speak for themselves, but numbers can make random events seem related. Such is the case with the Super Bowl Indicator. Which team wins the NFL championship has as much of an influence on stock prices as does Punxsutawney Phil’s shadow. (Note to Phil: Keep your shadow out of sight this year.)

Hirsch credits the success of the January Barometer to the federal government’s calendar and the 20th Constitutional Amendment, which significantly shortened the congressional lame duck session. (Hirsch says there would be no Charles Woodson Jersey January Barometer if this amendment didn’t exist.) In addition to the convening of a new Congress (every two years), Hirsch also points out that January brings the State of the Union address and any changes to the president’s priorities.

I don’t think one can rule out the impact of fourth quarter corporate profit reports, which are released in January and often come with projections for the new year. To the Dave Casper Jersey extent that forecasts lead to expectations of changes in spending patterns, stocks will react.

The flip side is that four of the January Barometer’s errors have occurred since 2000. It was a tough decade for stocks, however. Hirsch defends these errors by pointing to the impact of the terrorist attacks in 2001, the anticipation of military action in Iraq during 2003 and the bottoming of the bear market in 2009.

The presidential cycle has the best basis. A president entering into the third year of a term is thinking about re election and looking for ways to boost the economy. President Obama talked about job creation, instituting regulatory reform, and the need for bipartisan cooperation in his State of the Union speech, goals that could help the economy.

It is important to remember that portfolio allocations are long term strategic decisions. Thus, while calendar based stock market indicators can make higher beta (more volatile) stocks or lower beta (less volatile) stocks appear more attractive over the short term, these indicators should not be used to adjust your overall asset allocations.

Still, I’m hoping all three indicators are correct this year. And, since I live within 25 miles of the Wisconsin state line, Authentic Sebastian Janikowski Jersey go Packers!

AAII MODEL PORTFOLIOS

All three model portfolios saw their fourth straight month of gains during December. After gaining 8.6% in December, the Model Shadow Stock Portfolio Otis Sistrunk Raiders Jersey finished the year up 45.4% compared to 17.1% for the Vanguard Total Stock Market Index fund and 31.3% for the DFA US Micro Cap Index fund. The Model Mutual Fund Portfolio and Model ETF Portfolio gained 6.8% and 7.1% for the month and 20.3% and 21.9% for the year, respectively. The Model Mutual Fund Portfolio outperformed the Vanguard Total Stock Market Index fund and the Model ETF Portfolio beat the iShares DJ US Total Market Index ETF, which finished the year up 16.4%.

THE WEEK AHEADNearly 100 S 500 member companies will report earnings next week. Included in this group are Dow components Pfizer (NYSE:PFE) and Merck Co. (NYSE:MRK). Pfizer will report on Tuesday and Merck will report on Thursday.

December personal income and spending will be the week’s first economic data, with a Monday morning release. Tuesday features the January ISM manufacturing index and December construction spending. ADP’s January employment report, which calculates only the change in private jobs, will be published on Wednesday. Thursday features the January ISM services index, December factory orders and the first look at fourth quarter productivity. January jobs data, including the unemployment rate and change in nonfarm payrolls (both private and government), will be released by the Labor Department on Friday.

Atlanta Federal Reserve Bank President Dennis Lockhart will speak publicly on Monday. Federal Reserve Chairman Ben Bernanke and Minneapolis Federal Reserve President Narayana Kocherlakota will speak on Thursday.