Patterns about spending behavior were studied since the dawn of equities, and everything from underwear, to mini skirts, to superbowl were analyzed in terms of consumer behavior. In particular watch were consumer thriftiness to over extravagance flashiness.
1.Mini skirt hemline indicator
n 1926, economist George Taylor noticed that fluctuating fashion. Like the stock market, the length of many women's dresses also fell with a peculiar synchronicity. Perhaps this hemline index, as Taylor coined it, reflected the grim economy's psychological effect on the public. It wasn't a time for rash celebration and risk taking; instead, the Great Depression called for a return to fiscal modesty.
For a while, Taylor's hemline index appeared to have the staying power of the little black dress. When the micro miniskirt fad of the 1960s rolled around, the market was up. Then, with the Arab oil embargo in 1973, long maxiskirts came into vogue as stock values slumped. In the 1980s, perhaps due to the hemline index's sexist overtones, men's neckties became the armchair economic harbinger of choice. Skinny ties foretold a bullish market, and wider ones signified the declining bear – howstuffworks
2.Lipstick Indicator
One Depression-era pattern in female spending that hemline hawk George Taylor didn't take note of was the 25 percent increase in cosmetics sales When a similar spike occurred during the economic doldrums of 1990 and 2001, this type of consumer behavior didn't elude Leonard Lauder, chairman of Estee Lauder Companies, which manufacture the cosmetic lines Estee Lauder, Clinique and MAC.
Lauder took particular interest in the rise in lipstick purchases. In the fall of 2001, when the economy buckled after the Sept. 11 attacks, Estee Lauder lipstick sales jumped 11 percent That trend in discretionary (or nonessential) spending has become known as the lipstick indicator.
When women can't afford pricier indulgences, Lauder mused, lipstick offers a cheaper compromise. If a woman aches for a new Chanel handbag that far exceeds her budget, opting for a $30 tube of Rouge Allure lipstick in limited-edition Violet Diamond may feel like a thrifty shopping decision. Also, women who wear lipstick probably reapply at least a few times per day. Such instant gratification can ease the urge to shop more – howstuffworks
3. Underwear indicator
During a recession, underwear is among the first things that people stop buying—because hardly anybody actually sees them. This creates pent-up demand, and so when underwear sales level off and increase, it should signal an uptick in consumer demand.
According to the underwear indicator, an old favorite of Alan Greenspan, there needs to be a return to 2 to 3 percent annual growth in sales in order to claim a recovery.
However, consumer research group Mintel predicted underwear sales will see a continuing decline of 2.3 percent this year and no recovery until 2013.
But NPD's outlook for underwear sales offers more hope for the economy. After a year long, 12 percent decline through the end of January, men’s underwear sales leveled off in February and March, according to NPD.-cnbc
4. Boston Snow Indicator
This simple, one-for-one indicator suggests that a white Christmas in Boston means a rise for stocks the following year. The most common example is in 1995, when more than 11 inches of snow fell on Boston. In 1996, the S&P was up more than 20 percent, and the Dow increased more than 26 percent, so what’s the correlation?
In reality, there is no statistical correlation between Boston’s Christmas snowfall and positive performance in major market averages, which is why it is also called the “BS Indicator,” named by some NY Yankees fans on Wall St.
In the past 30 years, Boston has seen 9 White Christmases, according to the Farmer’s Almanac. In the years following, the S&P 500 was up 5 times (+14.99 on average), and down 4 times (-7.83 on average). It seems the Boston Snow Indicator may be more of a coin toss and less of a solid indicator.
5. superbowl indicator
The Stock Market Superbowl Indicator says that if the winner of the Superbowl is from the old National Football League, now the National Football Conference [NFC], in this case the New York Giants, then we will have a rising bullish stock market. If the winner is from the old American Football League, now the American Football Conference [AFC], New England Patriots, it indicaties an upcoming bear market. This indicator has reportedly been correct about 80% of the time. -financemanila.net
6. Billboard top 100 indicator
The newest indicator on this list is rooted in pop culture — it's got a good beat, and you can dance to it.
Phillip Maymin, assistant professor at the Polytechnic Institute of New York University, released a study in late 2008 that analyzes the connection between volatility in the market and trends in popular music.
Maymin analyzed the “beat variance” in songs from the Billboard Top 100 chart using sophisticated computer software, looking at songs from 1958 through 2007. He found that songs with high beat variance — individual tracks that shift tempo throughout the song — are preferred in times when market volatility is low. When volatility is high, people tend to prefer songs that have a more consistent beat.
Mayman suggests that high beat variance is more intellectually draining, and thus less popular during times of high volatility. His paper also analyzes trading volatility based on his findings, and the potential profitability of the indicator.
Can this trend be trusted? Maymann himself suggests that mood is the key driving force of this indicator, which has been known to affect markets. It certainly is the most scientifically approached indicator on this list…cnbc
7.Harvard MBA Indicator
This is a long-term indicator founded in quite a bit of logic. It looks at the percentages of Harvard Business school graduates entering into various market-sensitive jobs, such as investment banking, private equity and securities trading. The indicator signals investors to exit the market if more than 30 percent of graduates take these jobs, while investors should go long if less than 10 percent of graduates move into these fields.
The indicator is meant to demonstrate long-term trends based on the attractiveness of Wall Street jobs. The idea is that the more Harvard grads entering the financial job market, the more likely the market is nearing a top, or building a bubble that is about to burst. Conversely, when markets are lagging, fewer want to enter Wall Street and it may indicate a buying opportunity.
The indicator was created by Roy Soifer, a Harvard business graduate. In 1987 and 2000, Soifer’s index gave sell signals, and the S&P moved +2.04 percent and -9.78 percent respectively. However, the 1987 call seems rather prophetic, given the stock market crash that Fall.
8.January Effect
First recognized in the 1980s by Don Keim, a graduate student from the University of Chicago, was the January effect. He observed the phenomenon dating back to 1925, where small cap stocks outperform the broader market and mid- to large cap stocks in the month of January.
The trend arises from a historical sell-off trend that occurs in December, as private investors (who tend to disproportionately hold small cap stocks) sell their securities, creating tax losses in order to offset capital gains. The January effect results as these individual investors will reinvest following a drop in prices after the relatively artificial surge in sell orders.
However, the January effect has been less pronounced in recent years, with the increased popularity of tax-sheltered retirement funds, which remove the incentive to sell for a tax loss at the end of the year.
There is also the idea that according to the direction that the market takes in January, the rest of the year will follow. “As goes January, so goes the year.”
9. Aspirin Count Indicator
When times are tough, headaches abound… and aspirin sales go up! The idea is that, as a lagging indicator, stock prices and aspirin sales are inversely related. So, when the sales of asprin go up, the market goes down. This is generally considered more of a humorous theory than a concrete strategy.
How did this lagging indicator perform in 2008? Wyeth reported that sales of pain/headache reliever Advil were up 2 percent (to $673 million) compared to a year earlier, noting a sales increase of 8 percent (to $171 million) in the fourth quarter. So, at least for 2008 there seems to be a correlation, but then again, the aspirin count indicator has never been formally studied.
10. Sports Illustrated Swimsuit Cover
The Sports Illustrated Swimsuit issue is a hot topic in the world of economic indicators.
First, there is an indicator based upon the nationality of the cover model. It suggests that when the cover model is from the United States, the S&P will show a return for the year above it’s historical rate. With a non-American cover model, the S&P 500 will underperform for the year.
From 1979 to 2008, the average return of the S&P 500 was 8.87 percent. When the cover model was American, the average annual return of the S&P 500 was 13.9 percent. With a non-American cover model, the average annual return for the S&P 500 was 7.2 percent.
Going against the theory, the best performing year for the S&P 500 was in 1995 (up 33.56 percent) when the cover model was Daniela Pestova, of the Czech Republic. The worst performing cover model was also a victim of the financial meltdown, American-born Marissa Miller saw the S&P plummet 38.49 percent during her cover year. This year’s cover: Bar Rafaeli, an Israeli citizen.
11.Pallet/Cardboard Box Indicator
The Pallet/Cardboard Box indicators are straightforward and rather logical. Basically, the higher the demand for corrugated boxes and shipping pallets — necessities when shipping products to customers — the higher the demand for the products being shipped.
Today, virtually everything purchased on a large scale at some point was in a box or shipped on a pallet. Known followers of the cardboard box indicator include Alan Greenspan, who was known to look at cardboard box numbers, among other things, for insight into shifts in the economy.
In today's down economy, numerous businesses in the corrugated box industry are posting losses. Among them was European firm Smurfit Kappa Group PLC, the continent’s largest producer of the cardboard boxes. Smurfit’s revenues fell by $269.9 million in 2008 from 2007, with operating profits falling 50 percent, according to company documents.
It seems the cardboard box indicator can give some pretty reliable insight into the ebbs and flows of the markets. In a similar approach, many look at the transports to prognosticate that increased shipping implies a growing economy.
12. Bangladesh Butter Indicator
What does Bangladesh, India, have to do with the U.S. stock market? Plenty, according to some pundits. Using their calculations, taking the change in butter production in Bangladesh and multiplying it by two will give you the exact percentage by which the S&P 500 Index will change in the year ahead. Based on that, a 5% increase in butter production leads to a 10% hike in the S&P. The same statistics are believed to hold true on the downside. (For related reading, see The ABCs Of Stock Indexes.)
Fact or Fiction?
Like some of the other indicators, this one has a high enough degree of accuracy to satisfy its believers. Unfortunately, like most of the others, it also has no basis in economic fact. –investopedia
13. Presidential Approval Ratings
When the majority of a country dislikes the man in the White House, the stock market is supposed to soar. According to the numbers, a presidential approval rating between 35% and 50% is good news for the Dow Jones Industrial Average.
Fact or Fiction?
Based on this logic, voters seeking to line their pockets should vote for the candidate they hate the most. Hate for your leader is love for your portfolio? There's simply no logic to this one.
About dragon
Thanks for these leading indicators. Some of these might just be better than what we have now? Now, where are home prices heading?