People who work in finance are a hard-nosed bunch. They deal in numbers, dollar signs, and unvarnished facts, and they’re not likely to believe that supernatural forces govern the economy.
Still, they’re not immune to superstition. Traders and investors may appear outwardly fact-based and focused on the bottom line, but they can get as spooked by traumatic financial events as anyone. This has created some urban legends that haunt trading floors and boardrooms to this day.
Some of these superstitions have a basis in reality, while others seem made from whole cloth. Whatever the case, they exist, they rear their heads regularly, and they're not going away. Here are some of the more pervasive ones.
Sell on Rosh Hashanah, Buy on Yom Kippur
According to CNBC’s Turney Duff, it’s an article of faith at many trading desks that the Jewish New Year, Rosh Hashanah, is the time to sell. The Jewish calendar functions differently than the 12-month calendar, so Rosh Hashanah doesn’t happen on the same day every year. Keeping a Jewish calendar handy will help gentiles keep the timing straight, and they’ll also need it a couple of weeks later when Yom Kippur rolls around, the Jewish day of atonement. According to the superstition, that's the time to buy.
Duff said that this trade works “more often than not,” and there’s solid data to back it up. According to the Wall Street Journal, the S&P 500 index has had an average decline of half a percentage point during the seven or eight trading days that typically take place during Rosh Hashanah and Yom Kippur, going back as far as 1971. At the same time, that period in 2008 saw the S&P 500 drop 17.8%, so your mileage may vary.
Do Miniskirts Cause Bull Markets?
The clothes that people wear can tell you a lot about the state of the world. This is the concept behind the “hemline index,” a superstition positing that in good economic times, hemlines on women’s skirts will go up, then become longer during downturns. While fascinating, this hypothesis has been debunked multiple times, as post-war boom periods often saw hemlines go down because people could afford more fabric. Still, that hasn’t stopped the superstition from taking hold.
Big Buildings Mean Big Problems
Do you live in a major city? Is it breaking ground on lots of new construction projects? If so, it could mean you’re living in good economic times and should invest accordingly. But when those buildings get finished, watch out – a downturn may be on the way. Unlike some of the other superstitions, history shows that there may be something to this. The Great Depression followed the Empire State Building's completion, and the Dow Jones Industrial Average hit a two-year low after the completion of Chicago’s Sears Tower. Also, the tallest building in the world went up in Dubai in 2008, and we all remember how that year turned out.
The All-Powerful MUI
Women’s hemlines aren’t the only clothing-oriented economic indicator that some traders use to forecast the market’s ups and downs. No less an authority than former Federal Reserve chairman Alan Greenspan had an alternate theory called the MUI, or “men’s underwear index.” It proposes that even though men’s underwear sales tend to remain relatively static, they have their hills and valleys, which correlate to the economy. So if six-packs of Fruit of the Loom are gathering dust on store shelves, it may indicate that times are tough and men aren't spending their precious dollars on new underwear.
When they start selling again, it may suggest that better times have arrived, and men have decided en masse to ring in the occasion with a much-needed visit to the clothing store. According to the research firm Mintel, growth in the sales of men's underwear began to slow in 2008 as the Great Recession overtook us, so there may be some merit to this superstition.
Numerology is the belief in a mystical relationship between numbers and events. The fact that there is no evidence whatsoever to support it hasn’t stopped anyone from believing in a “lucky number.” Traders and investors are not immune, so one of the most well-known investor superstitions is the “Rule of 7,” which says that stocks will suffer a pullback, correction, or crash in any year ending in the number seven.
Multiple calamities, such as the Asian currency crisis of 1997 and Black Monday in 1987, would seem to lend some weight to this superstition. However, it's worth mentioning that some years ending in the number seven have also gone very well for investors. The most recent year ending in seven, 2017, saw the Dow exceed 20,000 points for the first time in its history, leading CNN Business to describe it as “an epic year for stocks.”
It’s also worth noting that years ending in a number other than seven have seen their fair share of woe. The stock market crash that caused the Great Depression took place in 1929, the collapse of the tech bubble happened in 2000, and the coronavirus crash took place in 2020.
War: The Bright Side
Few events in human history are more tragic than war, an exercise in large-scale suffering that signals a breakdown in humanity’s ability to reason. On the other hand, it may also be a chance to make some money!
This may be less a superstition than an astute observation – after all, war creates uncertainty and risk in the markets, which can cause selloffs and make some stocks increase in value. Shane Oliver, chief economist at AMP Capital, said that when the US went to war in Iraq – both in 1990 and in 2003 – stocks fell more than 10%, but rose again six months later.
He added that the way the market behaves during wartime may also depend on how it was doing before the first shot was fired. “Prior to World War II, the Cuban Missile Crisis and the two wars with Iraq, shares had already had bear markets,” he said. “This may have limited the size of the falls around the crisis."
The One About the Super Bowl
The United States is a country obsessed with spectator sports, perhaps none so much as football. The Super Bowl is the biggest football game of the year, so it’s not surprising that American investors and traders have a superstition involving the sport. It says that if the National Football League team wins, the market will go up for the year. Meanwhile, if the team from the American Football League wins, the market will go down. While there’s no scientific basis or rationale for this belief, it’s been right more often than it’s been wrong.
Daniel Bukszpan's reporting and commentary on finance, technology, and politics has been published in Fortune, The Daily Beast, CNBC.com, and other outlets. He lives in Brooklyn, New York.