What is a 'Boston Snow Indicator'

The Boston Snow Indicator is an economic theory that snow fall on Christmas Eve in Boston means that the stock market will experience growth the following year.

 

BREAKING DOWN 'Boston Snow Indicator'

The Boston Snow Indicator market theory may be just good fun, as there has been no actual correlation between snow fall totals in Boston and stock market growth. However, there is a precedent for trying to make sense out of things that don’t always follow a pattern.

Many different prediction theories exist that are similar to the Boston Snow Indicator and rely on a purely anecdotal approach. For instance, Groundhog Day, where a groundhog in Pennsylvania determines how much longer winter will last by whether he sees his shadow or not when he rises out of his den on the morning of February 2nd.

This is not to say that there may not have been a white Christmas in Boston that was once followed by a year of strong growth on the stock market. Most likely there was at least one such year, and thus the Boston Snow Indicator was born.

What is a Bull Market

A bull market is the term for the stock market when prices are expected to rise, and economic growth is expected to be strong. When people use the Boston Snow Indicator to make predictions about the following year’s market, they are expecting a bull market. A bull market is different from it’s counterpart, the bear market where stock prices fall, and investors are looking to sell off assets instead of purchasing them.

These market shifts are not easy to see coming. Making a determination of which type of market the economy is in takes time, and cannot be made based off of a single day’s activity.

Both types of markets have their upsides and down sides, although a bull market it thought to be a sign of a stronger economy, purchasing assets may be harder because prices are higher and fewer investors will be able to take advantage of hotter assets. A bear market almost always follows a strong bull market, which sees a significant drop in stock prices and economic decline, but a shrewd investor with plenty of capital may be able to take advantage of lower prices and purchase large amount of assets at rock bottom prices. If they have the resources to hold onto these assets until the market turns once more, they may be sitting on a large return on investment.

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