Superstitious Investing Doesn't Pay

Investors sometimes employ superstition when it comes to making financial decisions instead of basing those decisions on fundamentals. So goes the markets. Why?

because markets are made up of human beings (investors) who are at times irrational. Other times, crowded trades are caused by program-trading by institutions and algos. The inspiration for this week's musings is the 1980 movie, "Friday The 13th". Here’s some trivia about the movie:

• This movie was the inspiration of two previous films - "Halloween" (1978) and "Meatballs" (1989). The simplistic story and lack of special effects allowed the movie to come in at a meager budget of only $550,000. When the story and trills resonated with audiences, the final box office tally was more than $39 million. It was the 18th highest grossing movie of 1980.

• The superstition of Friday the 13th comes from a combination of fears about Fridays and the number 13. Friday has been considered unlucky by numerous cultures, including Christian associations. The number 13 is typically described as the "incomplete" or "disruptive" number as it follows the number 12 - considered the complete number (12 months, 12 zodiac signs, etc.). The origin of Friday the 13th can be traced to an article in 1834 in the French magazine "Revue de Paris" referencing a misfortune and stating, "It is always Fridays and the number 13 that bring bad luck."

• The movie was filmed at Camp No-Be-BoSco in Blairstown, NJ. It is a Boy Scout Camp that is still in operation, and it has a wall of Friday the 13th memorabilia to honor that the movie was filmed there.

• Betsy Palmer, who played the part of Mrs. Voorhees (Jason's mother), stated if it were not for the fact that she was in desperate need for a new car, she would never have accepted the role. She recalled she thought the movie was a "piece of @$&%."

• Since the original in 1980, there have been 11 other sequels or reboots of the franchise grossing a total of $465 million at the box office. Ah, the power of a rusty blade and a mask...

Here's what we've seen so far this week...

Seasonality Or Superstition? If you're the type of person that believes that a victim accidentally falls down 5 or 6 times while being chased by a masked killer, you're

probably not suited for investing in volatile equity sectors of the market. This week the rout in tech stocks continued as hedge funds, institutional funds, and algorithmic traders worked out of extended positions and rotated to other names. In fact, short interest on technology stocks has reached a peak level that suggests a bottom may be forming in tech names. Time will tell, but shorting tech at this point seems to be a crowded trade.

As we pointed out last week, February is not a great month for equities in the calendar year. There's typically only a 50:50 probability that the month of February ends higher

than it started. In fact, the back end of February from a seasonality perspective is the worst part of the month. Last year, February saw the S&P 500 Index decline more than 2%. This year, we've seen quite the opposite. It's been the front-end of February that has been lower. Does that mean we could see a flip-flop in 2026 for February?

From a technical analysis perspective, we still have not seen a breakdown in some key indicators that would suggest we're headed for immediate danger. So far, we've only

seen new lows on the New York Stock Exchange reach 134 names. It usually has to far exceed 150 names before panic sets in. Credit spreads have failed to expand dramatically, which is usually a sign that bond markets are expecting volatility ahead. Lastly, we need to see the ratio of Discretionary stocks to Staples roll over on a 50-day moving average. The ratio has moved below the 50-day moving average (orange line), but the orange line hasn't yet rolled over. When these indicators flash warning signs, then it might be time to be concerned.

Fundamentals Over Fantasy.  The worst mistake typically made in horror films by the soon-to-be-murdered extra, is hearing a noise and walking into the dark room alone.

Really? The same could be said of investors who fail to follow economic fundamentals. All week, economists have been wringing their hands expecting a bad inflation number. Yet, this morning, the Consumer Price Index for January came in at +0.2%, less than the expected +0.3% and the year-over-year reading fell from +2.7% last month to +2.4%. While this number should be cheered, instead there are those that think this means a rate cut in the first half of 2026 is now off the table. For the last couple of months, the futures for the next rate cut have been pointing to June and that hasn't changed much. Lower inflation means a tailwind for consumers, rate cut or no rate cut.

In other good news this week, the Jobs Report also came in better than expected. The market was expecting a meager 66,000 new jobs, but the report came in with 130,000

new hires in January. Overall, this report along with the jobless claims, point to a continued "low hire, low fire" environment for the labor market. Both Jobless Claims and Continuing Claims show no similarity to previous pre-recessionary periods where both metrics spike with labor market weakness. At this point, a stable inflationary environment accompanied by a stable labor market means spending is likely to continue.

The bulk of economic and market data point to stable financial conditions, as measured by the Chicago Fed's National Financial Conditions Index. The barometer is at a low

reading of -0.57, which means that financial conditions are loose. While market pundits are pushing the panic button, the index has steadily moved lower over the past 3 years. At this point in time, we would need to see the index make a substantial move closer to zero or above zero before we would be concerned about the next recession. In these volatile investing periods, it's important to keep your head...unlike the victims or Mr. Voorhees.

Here's the surprise ending to the original movie...

https://www.youtube.com/watch?v=aLZdkbNxKn0

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Disclosures

The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.

Forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.

Any market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.

Past Performance does not guarantee future results.