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%.
Yet some calls, such as scepticism about the tech bubble, were right but more than a year early. In some cases the link between the cover and the view of an asset class was a stretch: was a cover against Scottish independence really a bearish view on UK equities, for instance? This is all good fun, concludes Buttonwood, but not something to take too seriously.
Subscribe to 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
-
Ticket scam warning ahead of major summer eventsA total of £6.7 million was lost to ticket scams last year. With the Taylor Swift Eras tour and Glastonbury Festival coming up, we explain how to stay safe when buying tickets
-
GDP: UK economy exits recessionThe latest GDP figures reveal the UK economy grew by 0.6% in the first three months of the year, officially exiting recession. We look at what households and investors can expect next.
