8 Big Numbers

Andrew Burkly of Brown Brothers Harriman & Co puts out a list of significant numbers each January. Its a clever way to think about various aspects of the market and the economy — by the numbers.

These are his "8 Big Numbers" for 2008.

The S&P 500 Index needs to close above its March 2000 peak of 1552, as well as break its 2007 trading range of 1575 – 1370
to keep the structural bull market intact. An upside break of the range
would indicate that the volatile trading of 2007 was merely a
high-level consolidation. One indication that the bull market is back
in gear would be the number ofcommon stocks hitting net new  52-week highs climbing back into the 500 range.

Domestic equity funds witnessed outflows in 2007 totaling $54 billion suggesting that investor sentiment is far from euphoric. Finally, the average gain during year 4 of the presidential election cycle has been 8.9% since 1928.

Meanwhile in 2008, 3.6% is a key level to watch for the 10-year Treasury yield, the commodity bull market moves into its 6th year, and the S&P 500 Energy Sector looks for its fourth sector performance crown in five years – a winning percentage of .800.

1. “1552” The March 2000
peak in the S&P 500 Index
2. “1575-1370” – The 2007 trading range in the S&P 500

3. “500” The number
of stocks hitting net new 52-week highs in a healthy market
4. “-54” Outflows ($billions) from
domestic funds in 2007 (through Nov.)
5. “4 2008 is year 4 of the presidential election cycle

6. “3.6%” A significant
support level for the 10-year Treasury yield
7. “6” 2008 marks the 6th year of the commodity
bull market
8. “.800” Energy going for its fourth sector performance crown in five years

Good stuff. Thanks, Andrew . . .

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  1. Byno commented on Jan 11

    Two things:

    1. Domestic funds experienced outflows last year. Big deal. What were the total inflows for international funds. I bet ya a dollar it more than offset the domestic outflows. Dumb money flows to the highest performing asset; this is not news. It doesn’t mean that domestic funds will go up in ’08, only that they may outperform INTL funds on a relative basis.

    2. Can we please, for the love of all that is good, stop talking about the stupid election year indicator. Please. Pretty pretty please with two cherries and real whipped cream? Since 1928, we can say with 73% confidence that election years are better performing years than other years. 73% is great if you’re trying to get kids to stop smoking – it’s total dog-shit taco if you’re trying to argue that election year returns have anything to do with anything. Furthermore, the election year indicator is no better than a coin flip over the last twenty-five years (in terms of being better or worse than the average market return), so it looks like traders have caught on.

    I know that the election year thing is not your research, Barry, but that whole canard needs to be taken out back and shot in the head and you could be the one to do it.

  2. 2and20 commented on Jan 11

    so how does any of this help me make money? it doesn’t. this is the sort of stuff they put on CNBC, c’mon i know you are better than the MSM!

  3. John commented on Jan 11

    I agree with both Byno and 2and20 above. What did the Nasdaq do from March-May in 2000, and then thereafter? What did the indexes do from the beginning of 2004 to around September of that year? You had plenty of time to wait for a “buying opportunity”, in many a Sector– at least for a shorter time trade, if one chose to do so.
    When the election of 2000 hung in the balance I recall the after hour futures markets on the Dow, Nasdaq and S&P all rose when it looked like the election was going to go for Bush and fell when it looked like the election was going to go to Gore. Perceptions in economic/tax policy maybe …
    I think WHOEVER wins the Democratic Nomination stands a good chance to win the Presidential Election this year. I found it interesting after watching the Republican debate last night in South Carolina, shown on Fox News, the ‘call in’ poll (by text messaging — perhaps favoring the kids with their cell phones…) had Ron Paul as the clear winner. This was in stark contrast to a small group of (older) people clustered into a Room, and interviewed by a Fox News pollster, that had the debate going to Fred Thompson…
    Ron Paul seems to share many of the viewpoints presented here regarding the causes of (unreported) High Inflation, the Devaluation of the Dollar, Federal Deficit, the Easy Monetary Policy of the Federal Reserve and Federal Government Spending.
    I could be wrong but the trend seems to favor a candidate whose economic/tax policies won’t be as favorable to Wall Street as they are now.
    I agree somewhat with Barry’s forecast of the Market pulling back to (at least) the 11,400-11,900 level by sometime midyear and then rising, perhaps faster this time than in years past– once the candidate for president becomes fairly obvious to the pollsters and the uncertainty is removed from the Market.
    But I can’t help but wonder, given the time it will take for this Housing Recession to work itself out (another +/-24 months according to some forecasts), combined with High Energy/Food Costs/ Higher Real Estate Taxes etc. if Barry’s original 2006 forecast (6,800??) for the Dow, doesn’t happen sometime in late 2009-2010. I think the 73-74 Bear Market took out the previous lows… and I think High Commodity Prices (eventually limiting the Global Central Banks to cut rates/pour money into the markets) will Tank the Stock Markets, not the other way around…

  4. Pool Shark commented on Jan 11

    Ditto what Byno and John said…

    Wasn’t the all time historical low in the DJIA set in 1932, and who was elected that year?

  5. fatbear commented on Jan 11

    re Election year gibberish

    Nearly all those 4 year cycles involved an incumbent running (either the Pres for re-election or the VP to succeed the Pres) – this time, not so – the first time since 1952.

    And before 1952, you have to go back to 1928 (but Hoover was a member of the Pres’ Cabinet) or 1920.

    So, if you can derive any information from the markets in 1920, 1928 (iffy) or 1952, go to it – the rest of the Pres cycles have nothing to do with this one….

  6. DavidB commented on Jan 11

    That reminds me, why didn’t Cheney run for president?


  7. me commented on Jan 14

    “That reminds me, why didn’t Cheney run for president?”

    Don’t you know the Constitution? He is only allowed two terms.

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