I’ve had my experiences with astrology over the decades, some ridiculous and funny, others serious and sobering. I believe there is something to it on a large scale, meaning, if the moon can affect the tides on earth to such a great degree, it seems plausible that the other bodies and forces moving about in the solar system can affect someone at birth and beyond. Taking those affects down to a specific prediction, well that is another story, but, hey, who knows. “There are more things in heaven and earth, Horatio, than are dreamt of in your philosophy.” Oh, don’t worry. I am not taking this column over to the fantastic side, at least not yet. My discussing astrology has a point about trading and investing in the market.
Just when one thinks he or she has seen it all in the market, along comes an unexpected but interesting notion about investing and trading. Here, let the words speak for themselves.
- The use of financial astrology for both market timing and stock selection is an open secret among many successful investors. Fund managers and traders worldwide use it for both first and second opinions on global stock, bond and commodity markets.
The above is an excerpt from a TraderPlanet newsletter article titled, “Financial Astrology: Market Timing with the Stars.” The author, Henry Weingarten, puts forth a serious article about the merits of using astrology for investing and trading. It is worth reading, so here is the link, but keep an open mind when you go there. You will need it.
The “stars” are one way to plan a trading or investing strategy, but looking at terrestrial realities is another. One of those realities is the movement of money, especially multi-billions in investment money. Fear is a great driver of money movement, but so is greed.
- Even as the S&P 500 has gained more than 12 percent this year, investors have continued to pull money out of stock-based mutual funds and funnel it to bond funds. That could change this year as the returns from fixed income subside.
Are we looking at a “Great Rotation,” a movement of money from steady bonds toward risk assets, such as equities? The analysts at Bank of America Merrill Lynch think so. In fact, they are pushing the Great Rotation theory, and they predict that 2013 in the market will be a good year because of the movement of money from bonds to equities.
- Government bond returns will be between minus-3 percent and plus-2 percent
- U.S. and European Union corporate bonds will return between 2 and 7 percent.
- Global stocks will bring in 9 to 16 percent.
- Oil is likely to remain in a trading range around $90 a barrel but could plunge to $50 on the downside.
- The dollar and euro will be the strongest currencies amid the austerity measures.
I like the idea in principle, but other factors can change the movement of money. As I said, fear and greed are drivers, but so are economic fundamentals. For example, China has turned the corner economically and politically, and that means money moving back into Asian markets.
- Chinese stock markets on Friday had their biggest single-day jump since 2009, which some analysts attributed to expectations of further relaxation of rules on foreign investment in stocks.
Whether your approach to the market in 2013 is to listen to the “smart” folks on Wall Street (and you know how I feel about that) or it is to look at the stars (interesting but unverifiable at the moment), don’t forget about the economic, geopolitical, and market fundamentals that drive the movement of money. As I write now, those fundamentals are aligning in a formation only seen after great economic calamities, such as the one we last saw in 2008. Historically, this alignment means prosperity is coming. Are you ready to seize the opportunity?
Trade in the day; Invest in your life …
