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Are magazine covers a contrarian indicator?

Are magazine covers a contrarian indicator? | The Economist | October 26, 2016
Business
Source: The Economist
October 26, 2016
FINDING a reliable way of timing the market is something that has eluded the greatest investment minds in history. That is why many people are tempted by the “magazine cover indicator” as a contrarian signal. One of the most famous was Business Week’s “Death of Equities” cover in 1979 (which actually came three years before the great bull market got going).Two analysts from Citigroup, Greg Marks and Brent Donnelly, write that:The premise behind the indicator is that when a journalist or editor finally devotes a cover to a market trend, company, country or person, the story or theme has been in vogue for some time and is likely past its peak. Positioning and sentiment should already fully reflect the story on the cover of the publication and the story should be fully priced in. In other words, by the time a journalist writes about the trend, a majority of the move has already happened.The analysts—the cheeky devils—decided to apply the test to The Economist’s covers. They...Continue reading

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