February 10, 2013

Happy (Chinese) New Year! On February 10th, we enter the “Year of the Snake” on the Chinese calendar. And according to some Asian astrologers, the year might be just as ill-omened as the name sounds.

According to AFP, “Astrologers say this year’s snake is identified with the element of water — symbolizing fear — that sits on top of the fire element, representing joy and optimism. They say conflict between the two will bring turbulence in May.” In China and other areas of Asia, there was a rush to get married and give birth before the end of the very auspicious year of the dragon, which ended Saturday.

The last year of the snake was 2001: the year of 9/11, a recession, and a major downturn in the stock markets.

For the Chinese communist government, 1989 was a particularly bad year. Student protestors began a months-long protest in Tiananmen Square in Beijing, which ended with martial law and a violent military crackdown on the peaceful protestors.

On the other hand, 1989 wasn’t such a bad year for the U.S. stock market, with the S&P 500 (the C Fund) enjoying a 10%+ year. (Elsewhere, Japan’s Nikkei hit its all-time high before beginning a two-decades long decline from December that year.) Other “Snake” years in the U.S. were mixed, with the S&P 500 in 1977 experiencing a decline of about 15%, while in 1965 it was up by 10% or so, and in 1953 it was down by around 10%. These are all approximate figures, since the Chinese calendar does not match up directly with Gregorian calendar.

Of course, 1941 was a momentous year for the United States, ending as it did with the attack on Pearl Harbor and the official U.S. entrance in World War II.

This year’s calendar is particularly unusual, because it is a “blind snake” – it does not have a first day of spring, which was February 4 (thus last year’s Dragon enjoyed two days of spring, making it particularly auspicious).

This is all the more interesting for stock markets because, according to the Presidential Election Cycle theory, the first year of a president’s four-year term (this year) is the weakest.

Of course, stock markets and the TSP stock funds roared ahead in January, which traditionally bodes well for the rest of the year. When stock markets rise in January, they tend to end the year in positive territory.

So this year, who knows? I’ve personally set my long-term TSP allocation as I detail in Strategy I & II in TSP Investing Strategies, and I am prepared to implement Strategies III and IV in case of major market swings in the months ahead.

This of course presumes federal workers have not been furloughed by then due to sequestration

Related topics: investing-styles