Well two out of three is not bad. First the bulls had Punxsutawney Phil on their sides. Then they had the Super Bowl. All they needed for the trifecta was an American on the cover of the annual Sports Illustrated Swimsuit issue. Unfortunately, they are going to have to settle for two out of three. On last night's Late Show with David Letterman, the cover model of this year's issue was revealed to be Irina Shayk, who hails from Russia.
While we're all familiar with the Super Bowl Indicator, have you ever heard of the Sports Illustrated Swimsuit Issue Indicator? The Swimsuit Issue Indicator says that the US equity markets perform better in years where an American appears on the cover of Sports Illustrated's annual issue as opposed to years when a non-American appears on the cover.
The table below highlights the annual performance of the S&P 500 since 1978. For each year, we also show the country from which that year's cover model came from. Since 1978, an American has appeared on the cover of the annual Sports Illustrated Swimsuit Issue in 17 different years. The average performance of the S&P 500 during those years is a gain of 10.7% with positive returns 82.4% of the time. Of the 16 years where no American appeared on the cover, the S&P 500 has averaged a gain of 8.2% with positive returns 75% of the time. To be sure, we would note that the S&P 500's 38.5% decline in 2008 when an American appeared on the cover caused the spread between the two performance numbers to narrow considerably.
So what does a Russian model on the cover mean for Russia's equity market? Interestingly, going back to 1978, this is the first year that we have seen a Russian model on the cover of the issue, so there is no precedent. However, just two weeks ago we noted that while all the other BRICs were crumbling, Russia had been doing exceptionally well. Coincidence?
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