The Year Of The Dragon Is The Second Best Zodiac Sign For Dow Returns

Gong Xi Fa Cai!  恭禧發財

It’s now The Year of the Dragon and the Economist  has posted an interesting piece on the performance of the Dow Jones Industrial and the Chinese astrological calendar.

The Economist writes,

CHINESE people across the world ushered in their new year on January 23rd, which according to 3,000 year-old Chinese astrology is the year of the dragon. This critter is not a mythical beast. Physignathus cocincinus, to give its Latin name, is associated with power, authority and good fortune. For those looking for good news among the grim January headlines, this could bode well for stockmarket fortunes over the coming year. Between 1900 and 2011, the nine previous dragon years have seen America’s Dow Jones Industrial Average price index increase by an average of 7.7% in real terms, the second-best historical record of the 12 zodiac animals. Such fortune may be short-lived however; next year’s animal, the snake, has the second-worst historical record.

Nice cocktail conversation but we wouldn’t be betting the dudgeon on it.

Very few observations and the data is skewed by the zodiac sign either being caught in the Great Depression or not.  The last Dragon came to us during the period February 2000 to January 2001, which marked the market top.  Also the Dragon was fortunate to remain out of the Depression, catching the 1928 stock boom and not retuning until 1940 after most of the stock carnage had occurred.

Then again, like technical analysis, if enough traders believe in it, it becomes self-fulfilling,  no?    If only the Chinese would fully liberalize their capital account and allow their 500 million day traders (hyperbole) to play in Dow stocks.  If, only!


Read more posts on Global Macro Monitor »