The Economist: a contrarian indicator?
The magazine cover indicator is supposed to be a contrarian signal, says The Economist – something that would seem to apply to its own covers.
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
-
‘Sandwich generation’ carers losing £6,000 a year to support elderly relativesMiddle-aged adults are often caught between caring for children or grandchildren and their elderly parents, leaving them taking time out of the workforce and facing a huge hit to wages while they are still trying to save for retirement. We look at the true cost of caring.
-
Ground rents to be capped at £250 a year – what does it mean for you?The government has published draft legislation which would see ground rents capped at £250 per year for leaseholders. We examine what it means for homeowners and the housing market.
