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S&P Capital IQ chief investment strategist Sam Stovall breaks down the relationship between the Chinese zodiac and market performance.
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-- story now could the year of the snake would be venomous for investors my next guest looked at the S&P 500 performance during the previous years of the snake and gets -- He found -- and ominous sign for the markets joining me now -- Sam Stovall chief equity strategist look.
S&P capital I accused them separate -- to bring it absolutely fascinating so we've gone back in -- you put your market historians.
See you love the stuff but.
We look at the Chinese zodiac in the year of the snake which we are in now hasn't traditionally been very good for the markets.
No -- happened I do like looking back.
In history but unfortunately I don't like what I see when it comes to the -- of the -- the average price change has been a decline of close to 4%.
And the market fell in basically two out of every three observations of course realizing that there's no guarantee that -- will happen going forward.
But no correlation to anything else it's just coincidences that's a good question because side you do have to realize if you're looking at indicators you wanna make sure that -- something.
Called causation all along with the correlation -- what causes it to happen.
There's no causation with a super bubble theory there's no colonization with numerology did you know that the year -- ending in five have never gone down.
But with the year of the snake it's the first year of the four year presidential cycle okay usually not as good as the other three year.
And you look back in history US into global one on the year the snake the 29 now stock market crash.
Japanese.
Attacking Paul -- at 9/11 all happened in the year of the snakes.
It's very interest thing -- -- get to what's going on in the markets now saying we can't.
A lot of big deals the number of big deals up 25%.
Since the beginning of the year.
You gotta be encouraged by that value.
Absolutely -- when you realize that more than a trillion dollars of cash is on the books of non financial companies.
In the S&P 500 pretty much itching to be put to work 40% of that money is found in the technology space.
About 20% in health care you gotta wonder where how they gonna put this money to work.
Dividends yes you share buybacks yes.
Investing in themselves.
Capital expenditure yes and then also mergers and acquisition activity if he can't grow organically.
Will then you just buy it and you have instant market share.
So what do the markets go from -- seems to me that kind of stalled out right now perhaps waiting to see what's happening in Washington make up these speak.
-- -- -- -- -- -- -- -- -- That's right well there's usually what's called a correction that takes place.
And it happens either in price or in time meaning that -- the market basically goes nowhere for awhile that's what's called a correction in time so the markets -- to digest themselves.
And as we move forward we get more earnings etc.
Then the valuations become a little more attractive.
We could also see a -- correction in price.
Where we actually go down to prior levels.
Give back some of the gains or digest and as we like to say.
And then that would cause investors to say oh I have lower prices I missed the rally let me get back again.
So where do the markets go from here.
I think that they probably see a bit of what I call pull back -- five to 10% decline in the but then I think we go back and we challenge the all time high of 1565.
In the S&P 500.
We're gonna need some sort of a catalyst to push us up to that level and maybe it's some sort of an agreement coming out of Washington.
Maybe it's better than expected payroll data or proof and -- sense that the trajectory of the economic growth.
Is improving.
But I think we're gonna need something to sort of get us over this hump.
Very -- we need to -- so many people said that's a good healthy pullback is what we need before moving higher by the -- the best year on the Chinese zodiac is the year of the pig is that right.
That's correct up about 28% on average.
It up coincides with a third year of the president's term in office and that's to up next in 2015 -- year ends in five.
And -- -- that -- declined since 19100 but that's right pay you were listening thank you I'm paying attention -- fascinated by -- thank you so much that my pleasure of being.
