Chart In Focus
Sunspots and the Stock Market: A Weak Relationship
McClellan Financial Publications, Inc
Posted Nov 11, 2018
November 08, 2018
I was asked recently about the upcoming “grand solar minimum”, and whether it means anything for the stock market. This is something I have looked at, and the answer is that I wish it was more meaningful than it really is.
Solar minimum is when the sunspot count bottoms out as the sun goes quieter. The sunspot cycle averages 11 years, but over the historical record its period has varied from 9-14 years. This week’s chart shows that at the solar minimum, there is often a noticeable bottom for stock prices, as long as you allow a punctuality tolerance of about 2 years. That is a pretty wide window for market timing purposes. So while it is an interesting phenomenon, it is not that useful for trading decisions.
And not all solar minima see the same degree of an effect. The solar minimum did coincide with really important bottoms in 2009, 1974, and 1932, but at other times like 1994 it is tough to find the stock market bottom which marks the solar minimum. There does not appear to be any great bear market effect going on right now.
It is also interesting, that the mid-point of the solar cycle usually sees some kind of meaningful price bottom, roughly in line with the peak month for solar activity. That’s fascinating, but again not that useful, because we don’t know while it is happening that one particular month is going to mark the peak of any given cycle.
So I chalk this up in the category of fascinating, but not very usable for investing or trading purposes.
With that point established, I will go on to say that the sunspot cycle can be shown to matter more reliably in other human social events outside of the stock market. The ascending phase of a new solar cycle (which is still a few years away) typically sees one or more mass public protest events.
This is a thesis first put forth by Russian researcher Alexander Leonidovich Chizhevsky (alternate: Tchijevsky) who correlated instances of wars, revolutions, riots, etc. with the sunspot cycle, going back over 2000 years. He wound up spending a long time in a Russian gulag because his views about what sparked the 1917 Russian Revolution conflicted with those of Josef Stalin.
The next two charts show the monthly sunspot number, and the 9-14 year cycle period is fairly evident. Typically we see the major protest movements on the ascending phase of each cycle, and the Arab Spring in 2011 was a great example.
This is not to say that there are not protests at other times in the sunspot cycle. But the point is that protests arising at other times do not typically arouse the same degree of mass support from the public. The increasing solar activity seems to work somehow on human brains, increasing our collective uppitiness such that long-festering problems finally come to a head, and people are willing to go out into the streets to try to do something about them.
Those problems, and the public’s annoyance about them, may have existed for a long time before, but something about having Earth receive an increasing amount of charged particles from the Sun in the ascending phase seems to spark that annoyance into action.
The last solar minimum was in 2009, and so counting forward 11 years, we get to 2020 as the ideal time for the next solar minimum. But remember that it can vary from 9 to 14 years. When we get to the next ascending phase a couple of years after that next solar minimum, we can look forward to some big public protest movement being a big deal, perhaps in the USA, perhaps elsewhere.
What that grievance will be about is not something I have the ability to forecast. But I can say that if President Trump is successful at winning reelection in 2020, then dealing with that protest movement in the early 2020s will be the main theme of that second term. And if someone else defeats President Trump in 2020, then the appearance of a mass protest movement in 2022-24 could perhaps doom that president to only a single term.
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Nov 8, 2018
Editor, The McClellan Market Report
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