While the Gregorian calendar’s new year is already a few forgotten resolutions ago, the Lunar New Year is fast approaching.
Next week, people living in China – and elsewhere throughout much of Asia – will celebrate Lunar New Year by spending time with family and exchanging gifts.
Every year on the Chinese Lunar calendar is named after one of 12 animals in the Chinese zodiac cycle. The year of the dog is coming to an end, and before that was the year of the rooster. Other years are named after dragons, rabbits, rats and snakes, to name just a few.
There’s no particular reason that the Lunar New Year (sometimes called Spring Festival) should have much of an impact on stock markets. Whether in Asia or in the U.S., stock markets don’t know the month – or the zodiac year.
But it’s a historical fact that some years of the Chinese zodiac are better than others for stock markets. And the year of the pig – which starts on February 5 – has been a strong performer in the past. In the past, the year of the pig has meant above-average returns for both Asian and U.S. stock markets.
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The year of the pig for Asia
The MSCI Asia ex-Japan Index reflects the performance of major Asian markets, excluding Japan’s. Unfortunately, the index has only existed since 1988, so it hasn’t yet completed three full 12-year cycles of the Chinese zodiac. Thus the sample size used to calculate the figures below is quite small.
But with the data we do have, the graph below shows that the year of the pig has been the third-best year for Asian markets.
Past years of the pig have averaged a return of 25.2 percent. That’s 21.3 percentage points lower than the best-performing zodiac year, the rooster. But it’s well above the index’s average return of 12.9 percent a year.
Again, the MSCI Asia ex Japan Index’s performance during the year of the pig only has a sample size of two. So take these results with a giant helping of salt.
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The year of the pig for the U.S.
Even though Lunar New Year is one of the world’s most popular holidays, it’s more of a cultural curiosity in the U.S. It takes a backseat to Christmas, Halloween and other western holidays.
Since 1928, U.S. markets, as measured by the S&P 500, have performed in line with the overall average for the index. The year of the pig’s historical performance of 18.1 percent is higher compared to the index’s average return over the period of 11.4 percent.
These results are a little more robust than those for the MSCI Asia ex-Japan Index, as the S&P 500 has existed longer. We used performance figures for the S&P 500 going back to 1928, so the above reflects nearly eight full cycles of the 12-year Chinese zodiac.
Of course, there’s no scientific basis for the predictive powers of the Chinese zodiac. Just like there’s no basis for the January barometer, or the “sell in May and go away” trading rule (but they seem to work).
Publisher, Stansberry Pacific Research