EG Experience

Boston’s Snowfall – a Crystal Ball of Economic Indicators?

January 29, 2010 at 5:05 pm Leave a comment

Investors often try to find foolproof ways to predict the future. These investors will use almost any indicator to give them that trading edge.

One such indicator is the Boston Snow Indicator. The indicator states that if Boston receives a white Christmas, then the following year will provide a “bull” market with rising stock prices. For example, in 1995 a white Christmas was apparently reflected in 1996 by a greater than 20% increase in the S&P 500. So how exact is this trend indicator?

As a guide, the Farmer’s Almanac gives the trend only a 50/50 “coin toss” accuracy rate. Tongue in cheek investors tend to call it the “BS” indicator for a reason – likely a snow globe would give you the same results as would a crystal ball.

Those of us in snowy Canada believe a white Christmas can, in fact, be an economic indicator. We do not need a fortune teller to know that the following seasonal businesses will do well during a snowfall…

• Ski and snowboard companies love natural snow to groom the hills
• Tourist companies that rent ice fishing huts and equipment
• Retail stores that sell snow blowers, shovels, snow brushes, lock deicers, and sidewalk salt
• Landscapers put blades on their trucks ready to plow the driveways
• Ice rinks come to life with hockey and figure skaters
• Energy providers heating dwellings against the outside chill

Smart investors know that each season brings its own special needs, and that local businesses are in tune with area-specific weather fluctuations. Investing in these businesses gives you increased returns, which in turn improves the local economy.

And that is something you can count on.

Entry filed under: Business Trends, Interesting Facts. Tags: Business, economy, Interesting Facts.