“The Santa Claus rally” (stocks climbing at year end), “Sell in May and walk away” (historically stocks have in part done better in Fall and Winter), and even “The Super Bowl Indicator” (An NFC victory has correlated 80% of the time with an up stock market). These are all adages about correlations people have found about past events and stock market movements. Are these worth looking into? Does this kind of history help you make money?
The short answer is, no. You can always find some correlation of numbers. You flipped four heads in a row, several times your call number at the deli ends in a seven, you see ten white cars in a group on the freeway. These things are just random chance. But they aren’t significant if they aren’t predicted in advance. If someone in 1967 had predicted that NFC Super Bowl winners would indicate stock market movement, that would be significant. But no one did. It was just noted after the fact. The same thing with other anomalies. And just because people dream up a good cover story doesn’t make it more likely. Correlation is not causation. Stocks haven’t sometimes declined in May because it was May. It’s an anomaly nothing more. Don’t be fooled into risking your hard earned money based upon a random chance that temporarily looks like a pattern.