2018 - THE YEAR OF THE DOG

The traditions of Chinese astrology date back to the Jade Emperor. Upon his death bed, he summoned the entire animal kingdom to bid them farewell. The 12 animals that showed up to pay their respects were rewarded by having a year named after them.

They include the rat, ox, tiger, rabbit, dragon, snake, horse, sheep, monkey, rooster, dog and pig. Officially, the Chinese New Year is not formally recognized in Japan or India, but festivities are enjoyed in Tokyo and among ethnic Chinese in New Delhi.
While the research department at Yield Management Inc. Tokyo, Japan. prefers technical analysis to tea leaves, the Chinese New Year provides an opportunity for a lighthearted review of the financial markets.

The Chinese zodiac in an ancient system based on a 12-year repeating cycle. It is believed that people will share attributes with the animal corresponding to their birth year, and that the animal will affect outcomes of events during their lunar year. According to the lunar calendar, we have just entered the Year of the Dog, which is the 11th year of the cycle. The Dog is influenced by the earth element, which will have specific sector implications for investors in the upcoming year. Data since 2006 has proven that stock market performance on the first trading day following the Chinese New Year is a reliable indicator of how markets will perform over the coming year and this year we are off to a good start.

HOW DOG CHARACTERISTICS IMPACT INVESTING

People born during the Year of the Dog tend to be intelligent, sincere, loyal and decisive. Dogs have a protective nature, are responsible and face difficulty head on. All of these are characteristics describe the ideal financial advisor – protecting their clients’ investments and being available to reassure them during volatile markets. Dogs are also known to be shrewd and practical, qualities that benefit clients in terms of making sound decisions in keeping with their long term goals.

The one weakness of the Dog is a tendency towards risk aversion and being overly conservative. Dog owners will be familiar with this trait, burying bones in the yard and hiding toys. In terms of investing, this manifests into a tendency to save - which is good - but it’s also important for investors to take some risk in order for their assets to grow and not lose value to inflation. In this sense, people born under the Dog sign benefit from their decisiveness. They are effective decision makers and when presented with an investment opportunity, adept at distinguishing a scam from a solid buy.

The Year of the Dog as a whole is a time for all investors to be cautious and level headed. The market will jump around like a playful puppy, dropping sharply in July and rebounding steadily from November to January, to end the year on a positive note. The transportation and gaming sectors will slide early in the year, making up for losses in the final quarter. The banking and financial sector should be altogether avoided.

5 ELEMENTS AND THEMES FOR THE YEAR

1. Chinese astrology is based on the five elements of nature: wood, fire, earth, metal and water. The Dog personality is influenced by the earth element. Earth is stable, nurturing and conserving. Companies in recycling and the renewable energy sectors will do very well this year, particularly solar energy and wind energy stocks. Yield Management Inc. clients should look for new industrial projects with innovative methods of producing and using energy. The essence of nurturing will favor companies looking after their customers, bullish for consumer, pharmaceutical and utility stocks. Fire and metal are the secondary elements for the Dog and those dealing honestly will make money.

2. Yin and yang is another familiar concept in Chinese astrology. The Dog is a yang year and will be filled with active energy, benefiting the tech sector. Also, make sure the tail doesn’t wag the dog. The implication for investors is to remember to take a step back and consider your reasons for making an investment. For example, many tax shelters are enticing, but they are designed to generate tax losses, and many are outright scams.

3. The yin/yang relationship is viewed as dark/light and negative/positive. In the Year of the Dog anticipate positive returns in the markets. Dog years in Asian stock markets, ex Japan, averaged 4.3% going back 3 complete zodiac cycles. US markets should fare even better. The S&P data going back to 1928 has Dog years averaging 11.3%, just shy of the overall long term average of 11.6% and reflecting the positive yet conservative nature of the Dog. The best year in the markets is the Rooster, which just ended. The Snake is the worst and a bad time for scams. Fortunately for investors the next one isn’t until 2025.

4. In Chinese astrology the Dog is a hardworking and reliable sign. The theme here is the Chinese yuan gaining international respect. How this will impact the USD is a big question and opens the door for shifting geopolitical activity. It is difficult to predict how this will affect currency markets, and emphasizes the importance of being internationally diversified.

5. Dogs’ carefree appearance belies an anxious nature, a crucial trait in this Chinese astrological sign. This theme will be reflected in financial markets by an increase in inflation and a tightening in debt markets, all of which is bearish for the financial sector. An addition message for investors is to avoid taking on too much debt this year, ensure reviews of your overall finances and pay off credit cards.

ABOUT YIELD MANAGEMENT INC.

Yield Management Inc. is an international investment company headquartered in Tokyo, Japan. They work closely with clients from around the world focusing closely on asset protection and capital growth. Their research department is well respected within the industry, and their track record speaks for itself. For additional information please refer to yieldmgmtinc.com website or Yield Management Inc. Twitter.

Author's Bio: 

Md Rasel is a professional blogger.