The magazine cover indicator is supposed to be a contrarian signal, notes Buttonwood on Economist.com. The idea is that once the mainstream press gets round to covering a big story or trend, most of the upswing or downswing has already happened. BusinessWeek is known for proclaiming "the death of equities" close to the bottom of a bear market.
Analysts at Citigroup have applied the test to The Economist's covers. They selected 44 from between 1998 and 2016 that appeared to make an optimistic or pessimistic point about a market. The results were "a little chastening": buying the asset on a bearish cover resulted in an 18% return over the following year; selling on a bullish one led to a return of 7.5%.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Defeat into victory: the key to Simon Wolfson's successOpinion Next CEO Simon Wolfson claims he owes his success to a book on military strategy in World War II. What lessons does it hold, and how did he apply them to Next?
-
Aircraft leasing companies can lift investors' portfoliosThe aircraft leasing business is a safer way to cash in on air travel and its booming demand. David Prosser explains how it works and how to access it
