There once was an idea floating around that markets move with the moon. It sounds silly, but does stand up to some scrutiny. Research suggests the moon affects how we feel – more negative around a full moon; more positive around a new. We know that psychology plays a major part in market moves, so it makes sense that the two might be connected. Indeed, several studies show that markets do better around a new moon than a full – to the tune of 3%-5%. Fascinating, isn’t it? And once you know about it, it can seem to explain everything. Forget money flows and valuations – it’s all about the moon.
The problem, of course, is that lunar cycles aren’t the only thing that – once you vanish down their rabbit hole – seem to explain everything. Demographics is the same. Once you’ve looked at how the numbers of people knocking about affect everything from GDP (more people = more growth!) to valuations (more people investing = higher markets), you wonder why you bother with anything else. This is why the drop in developed world birth rates in 2020 is causing such upset.
Fertility rates have been falling anyway (the worldwide rate is down 50% in 50 years, from 5.1 babies per woman to 2.4). But everywhere from France to Florida, births in December and January were down 7%-20%. Places with the most extreme lockdowns saw the fewest births (eg, Italy). Perhaps March and April data will suggest things got a bit steamier over the summer. Perhaps not.
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
We were never convinced that combining a virus spread by close indoor contact with a government policy that effectively locked those of childbearing age inside with their existing children for months on end would feel very, well, sexy – and there is often a baby bust after a nasty crisis (think the 1930s and post-oil crisis in 1973). This matters. Having more old people than young puts stress on pension and healthcare systems and could hit markets (as oldies remove cash and fewer young are putting it in). We may also see inflation as workers’ bargaining power finally rises .
But a few things to note. First the bust might be temporary. Births are still a function of weddings (in 2019, two-thirds of babies in Italy and half in the UK were born in wedlock). There have been very few weddings in the last year. There will be an awful lot in the next year. More weddings. More babies – hopefully mostly conceived during a newly legal holiday in the sun. Note, too, there is nothing like the end of a crisis (hello vaccine...) to make people feel like making babies. The UK’s greatest baby boom ever was that of 1920, the year after the Spanish flu epidemic (even more lethal than the war had been). In all, 1.1 million babies were born – more than in 1947 (which fired the starting gun for the boomer generation) or any year since, despite the huge rise in the number of women. It must have been a hell of a year to be a pram salesman.
Second, even if the boom doesn’t last (it didn’t in the 1920s) and fertility rates continue to fall, it isn’t necessarily bad. If the pandemic does what many think it will have done – accelerated trends that could turbo-charge productivity – we might soon find that exploiting cheap labour isn’t the only way to grow GDP. Which would be nice. While we wait to see, those who want to be financially ready for the potential arrival of new family members and plan to invest accordingly might want to wait a few weeks: the next full moon is on 28 March.
-
Five years on: what did Covid cost us?We’re still counting the costs of the global coronavirus pandemic – and governments’ responses. What did we learn?
-
New tax year changes: how much will you have to pay in 2025/26?The new tax year will start on 6 April, 2025. We look at how taxes and allowances are changing and how they will affect you.
-
Five years on: what did Covid cost us?We’re still counting the costs of the global coronavirus pandemic – and governments’ responses. What did we learn?
-
Will Trump force the Fed to lower interest rates?Opinion Markets are ignoring the risk that Donald Trump forces the central bank into reckless interest rate cuts
-
London can lure Brexit-fleeing banks back to UK – but the City must move quicklyOpinion Many banks fled to Paris in the wake of Brexit but are now in full-scale retreat. The City should move quickly to lure them back, says Matthew Lynn
-
Protests erupt in Turkey after the arrest of president Erdogan's rivalTurkey's president has jailed his main political opponent, Ekrem Imamoglu
-
What is the Mar-a-Lago Accord and why is it getting attention from Wall Street?On Wall Street, there is talk that Trump's tariffs aim to make the world’s leaders come crawling to Mar-a-Lago, his Florida residence
-
Spring Statement: Rachel Reeves 'must turn good intentions into effective measures'Opinion Chancellor Rachel Reeves understands the economy’s structural problems but is unlikely to solve them, says Max King
-
England's department stores return – but do they have a future?Opinion The great traditional retail shops of Middle England have bounced back for now. Don’t get too carried away though, says Matthew Lynn
-
Can investors stay optimistic about Russian stocks?Investors look to profit from Russia as Trump pushes for peace in Ukraine. But is it worth the risk?
