The new year is off to an inauspicious start for Wall Street, and there are any number of pundits to listen to about what it all means and where the market will go from here. Then there are news headlines about North Korea allegedly testing a hydrogen bomb adding yet another wrinkle for investors.
We decided to try to remove the noise and look strictly at the data—and Sam Barnett of SBB Research Group is just the guy to help us do it. The 26-year-old hedge fund manager started his fund before his junior year of college back in 2010 and uses his mathematics skills to develop quantitative market models.
In general, he says one theme of 2016 will again be volatility.
“One of the misleading headlines from last year was that volatility went down ... It’s true there was a 5% change downwards in the VIX, but if you look at average daily closes, last year was actually 17% higher than the past two years. That is something I think continues to be a trend this year,” he told Yahoo Finance.
That’s not to say that Barnett doesn't think there aren't ways to make money this year.
“I think that there are lots of opportunities. We’re not in the same market that we were six years ago. Twelve million new jobs have been added, unemployment’s gone from 10% to 5%, [and] the Fed has some optimistic outlooks for the world.”
When it comes to putting money to work, Barnett says he pays special attention to the consumer “because it gives you a lot of insight into what the rest of the economy is doing.” But the team at SBB Research Group doesn't just look at consumer sentiment and other traditional indicators. “We like to find things that are subtle, that are things most people don’t really think about all the time and yet have really good predictive tendency,” Barnett said.
One such indicator he looks at is gym membership. “People searching for gym memberships are not searching for new jobs and vice versa. When people are searching for new jobs they're not searching for gym memberships or personal trainers.” In other words, broadly speaking, people with jobs have gym meberships and people without them don't. By way of example, Barnett notes that from 2007 to 2009 total gym memberships fell 3% as unemployment increased 3%.
Do you have a favorite indicator to help aid in investment decisions? Let us know in the comments or on Facebook and Twitter.