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Swimsuit Indicator: Why Stocks May Have a Good Year

U.S. stocks experience significantly better returns during years when an American model graces the cover of the Sports Illustrated swimsuit issue than during years when the magazine cover features a foreign model, history shows.

The 2012 Sports Illustrated Swimsuit Issue billboard is unveiled in New York's Times Square.
Gustavo Caballero | FilmMagic | Getty Images
The 2012 Sports Illustrated Swimsuit Issue billboard is unveiled in New York's Times Square.

The S&P 500 had an average return of 14.3 percent during the 17 years since 1978 that featured an American, with positive returns a whopping 88 percent of the time, according to the Bespoke Investment Group blog. That’s about four percentage points above the average return during the years that featured a model from another country.

The difference would be even greater, if not for the failure of the indicator in 2008, when the S&P 500 plunged 37 percent after Sports Illustrated featured American-born Marisa Miller and Lehman Brothers collapsed. Last year, Russia’s Irina Shayk graced the cover and the U.S. benchmark subsequently returned a disappointing 2.1 percent.

While Bespoke, a firm known for doing much more valuable statistical research for clients, calculated these numbers in jest, their founder sees plenty of reasons to like the chances for U.S. stocks this year.

“Valuations are the most attractive compared to the rest of the world in a backdrop where domestic economic data is coming in better than expected,” said Bespoke’s Paul Hickey.

The S&P 500 is up about seven percent so far in 2012 after the unemployment rate for January dropped and fourth-quarter earnings reports came in better than expected. That trend should continue after the latest issue, featuring St. Joseph, Michigan’s Kate Upton, hit newsstands today. The magazine typically puts out the swimsuit issue in February, giving investors plenty of time to follow the trend.

Model Kate Upton
Getty Images
Model Kate Upton

Notable cases when the Swimsuit Indicator was dead on include 2010, when SI’s cover featured Ohio’s Brooklyn Decker. The top of the tech bubble in 1999, when the S&P 500 returned 21 percent, had California supermodel Rebecca Romijn on the cover. Tellingly, in 1987, when the stock market experienced its worst one-day decline ever, Sports Illustrated decided to put Australian Elle Macpherson on the front of its February issue.

When asked about the trend, this year’s cover model Upton said, “Fingers crossed.”

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