Annual stock market indicators
BY CARTER E. ANTHONY, CFA
So, we have booked a slight increase in our wealth for the month of January, 2025, the first month of the last year of the first quarter of the 21st century.
It is safely stowed away in the footlocker of life, but now we wait to see what happens next.
After four years of a sleepy, depressing period under an unqualified and sick pretender, President Trump and staff have been a “runaway freight train” correcting and re-building our economy and country not seen since the days of FDR, the Great Depression and WW 2.
Those who understand how the world works are ecstatic while those who do not have become unhinged.
During the first five trading days of January, the stock market edged slightly higher which some take as a sign the market will be positive for the year.
The second January effect states the stock market will be positive for the year if the entire month of January is positive.
The S&P 500 rose 2.7% in January thereby giving us a doubly warm feeling for our stock investments in 2025.
Although a somewhat dubious indicator, if the older, more established National Football Conference (NFC) team wins the Super Bowl, the stock market is predicted to end on a positive note.
The NFC’s Philadelphia Eagles won it somewhat handily, indicating a positive result for 2025.
If the NFC team wins in a blowout, does that mean the stock market return will be a blowout?
Who knows but I can imagine lots of conversation wasted around the brokerage firms’ water coolers and coffee pots.
Last month, wise old owl, Wall Street veteran, Dr. Edward Yardeni of Yardeni Research, was quoted as saying, “With Trump back in the White House, ‘animal sprits’ are back”.
This brings to mind the stock market “Skirt Indicator”. When the market is wildly positive, skirts have been known to be short.
Conversely, when the market is flat to down, skirts are long. A cursory survey of my three daughters found that the skirt depends upon the occasion but short skirts are definitely not in.
The “midi” is the most popular. What does 74-year-old Yardeni know about “animal spirits”?
Another Super Bowl indicator might come from fan favorites of commercials. From a relative plethora of commercials, the Budweiser Clydesdales won first place in the USA Today Ad Meter for the ninth time.
There were plenty of choices from “animal spirits” that I have never seen on TV and hope to never see again to the Clydesdales and mayonnaise, traditional choices among family-traditional Americans. Is the family back, is common sense back, is our country back?
Moving on to Wall Street’s typical analytical numbers, we have the Relative Strength Index (RSI). The RSI is a technical analysis tool that measures the speed and change of price movements in a stock or in the market.
It is a momentum oscillator that moves between 0 and 100. Values below 30 indicate an oversold condition and values above 70 indicate an overbought condition.
While this explanation makes me sound smart, the current RSI is around 60, which tells us little except we are approaching an overbought condition, many of which including Warren Buffet and I have said before.
What could be a better indicator of the economy and the markets than transportation stocks, companies that move goods and people from one place to another across broad boundaries?
The Dow Jones Transportation Index consists of 20 companies in all phases of transportation.
As of Feb. 15, the Transportation Index has risen about 5% this year; the Industrial Average has also risen about 5%.
The stock market indexes rose more than 20% during 2023 and 2024, the first time for 20% back-to-back returns since 1995-1998, two and one-half decades ago.
We all know what happened at the end of that run. It was made on the backs of so many dot.com companies that disappeared into thin air.
This run has been made on the backs of the “Magnificent Seven” tech stocks and their artificial intelligence capabilities.
These seven stocks have made up as much as 30% of the 20% returns of the S&P 500 the past two years.
Several financial news stories have recently touted the “Magnificent Seven” stocks as being as old news as Hillary Clinton is old news.
Well, maybe not as much old news as is Clinton. I do not think a 20% return is in the cards this year.
