Some market watcher's superstitions are more bull than bear when it comes to predicting the market. When it comes to predicting the ups and downs:
- Some believe the market rises when skirt lengths become shorter and down when hemlines drop. For example, the market rose during the 1920s, when the flappers shocked the nation by shortening their skirts. Yet during the Great Depression on the 1930s hemlines went down; along with the market.
- Have you heard the phrase Once in a blue moon? Some people contend that the market goes up with a blue moon, which is the second full moon in a calender month. But it will be a while before the market is moonstruck again because the next blue moon won't arrive until July 2004.
- The sayings go: Wide ties, prepare for a bear. Narrow ties, brace for a bull. That's what some people were saying; throughout most of the 1980s and 1990s, when most bull were running, ties were conventionally slim.
- The Super bowl forecasts the direction of the market. Under this theory, the stock market will finish the year on an up note when a team from the original National Football League wins the Vince Lombari trophy. When a team from the old American Football League in the winner, the year will end with the stock prices down.
- Then there's Big Blue, IBM. Seventy percent of Fortune 1000 corporate logos are blue too! Even new brands like Bluefly, Blue Martini and JetBlue are sporting the color blue, why? It's symbolizes consistency and dependability says a member of Pantone Color Institute, "The sky has never fallen and water has never gone away."
With all of the associated news of the tragedy of September 11, 2001 market volatility for the US Stock Market has ensued as it has in past crisis like that of Pearl Harbor, the Kennedy assassination and the market crash of 1987. The DOW dropped immediately after each event and regained strength some months later. The actions of monetary and fiscal policy makers usually in time demonstrate a result in a marked improvement in the US economy. This drives corporate earnings and in turns drives the stock prices. The following information is a snapshot of how the DOW reacted within a short period of time after an event and then takes a look at the market six months later.
Reaction Period Percent change
change in after six
the DJIA months
Fall of France May 9- -17.1% 7.0%
June 22, 1940
Pearl Harbor Dec. 6- -6.5% -9.6%
Cuban missile crisis Oct. 19- -1.1% 24.2%
JFK assassination Nov. 21- -2.9% 15.1%
Nov 22, 1963
1973 oil embargo Oct.18- -17.9% 7.2%
Dec 5, 1973
Nixon resigns Aug. 9- -15.5% 12.5%
Aug. 29, 1974
US invades Grenada Oct. 24,1983- -2.7% -3.2%
Market crash of 1987 Oct. 2- -34.2% 15.0%
Oct. 9, 1987
Gulf war ultimatum Dec. 24, 1990- -4.3% 18.7%
Jan. 16, 1991
World Trade Center bombing Feb. 26- -0.5% 8.5%
Feb. 27, 1993
Oklahoma City bombing April 19- 0.6% 12.9%
April 20, 1995
Sept.11 Terrorist Attack Sept.10- -14.3% 28.8%
It's still too early to make any predictions about when the economy will improve. But it's safe to say that there is reason to be optimistic about America's long term financial future.
Update: June 5,2002. As of March 11, 2002--six months after the terrorist attack, the Dow Jones was up 28.8 percent, S&P 500 up 32 percent and NASDAQ was up 35.6 percent. All registered positive returns.
"The moral is to stick with your long term investment plan even during periods of market volatility," says investor Andy Hedrick. "Make sure your portfolio matches your risk tolerance and time horizon, and then let your plan work for you."
Source: Ned Davis Research