FINDING a reliable way of timing the market is something that has eluded the greatest investment minds in history. That is why many people are tempted by the magazine cover indicator as a contrarian signal. One of the most famous was Business Week’s “Death of Equities” cover in 1979 (which actually came three years before the great bull market got going).
Analysts Greg Marks and Brent Donnelly of Citigroup write that
The premise behind the indicator is that when a journalist or editor finally devotes a cover to a market trend, company, country or person, the story or theme has been in vogue for some time and is likely past its peak. Positioning and sentiment should already fully reflect the story on the cover of the publication and the story should be fully priced in. In other words, by the time a journalist writes about the trend, a majority of the move has already happened.
The two analysts – cheeky devils – decided to apply the test to The Economist’s covers. They elected 44 cover images between 1998 and 2016 which seemed to make an optimistic or pessimistic point….Continue reading