The so-called “Hemline Index,” which gained popularity back in the 1920s, suggested that as women’s hemlines rise, the markets generally go up, and vice versa: when more modest hemlines are de rigueur, this generally doesn’t bode well for the economy. The “Lipstick Theory” similarly suggests that as the markets go down, lipstick sales go up.
While the Hemline Index has generally been discredited over time, the Lipstick Theory has a more solid rationale. When markets are down, Lipstick Theorists believe, consumers generally feel less wealthy, so they’ll spend money on small indulgences (like lipstick) to make them feel better, as opposed to luxuries like designer clothes.
Sounds reasonable, right? How about something a little…sweeter?
There’s a new theory of economic indication that’s making headlines at the moment – it’s called the “Chocolate Indicator,” which is based on tracking chocolate-and-other-confectionary giant The Hershey Company’s market movements. A study conducted by CNBC demonstrated that, dating back to 1985, when Hershey stock has moved up or down, the S&P 500 tended to follow suit nine months later – a whopping 86% of the time.
It’s an impressive correlation, but we wouldn’t advise you to base your next market moves on it. While demand for consumer staples is used by many as a market predictor, it isn’t infallible. No one can consistently time the market perfectly – not even those who analyze markets for a living. Basing your portfolio moves on one single stock alone? You could be setting yourself up for disaster.
Sure is one deliciously fun factoid, though.