The Occupy Wall Street Index: Remembering the Bottom

By Michael Comeau  MAY 02, 2012 2:35 PM

With Occupy Wall Street once again taking New York City by storm, it's time to look at Minyanville's Occupy Wall Street Index one more time.


MINYANVILLE ORIGINAL Last October, we created the Occupy Wall Street Index to look at at the outrage of the 99% at corporate America through a stock-market prism.

The construction of the index was pretty simple.

We selected nine companies representing what the 99% rail against, including Wall Street titans JPMorgan (JPM) and Goldman Sachs (GS), conservative media powerhouse News Corp. (NWSA), and anti-union retail giant Wal-Mart (WMT). (See: The Occupy Wall Street Index: 9 Companies the 99% Loves to Hate.)

We equal-weighted the nine stocks, and backdated the index to begin on September 16, 2011, the last trading day before the Occupy movement began in New York City.

The goal of this decidedly unscientific experiment was to see if investing in the worst-of-the-worst (in the eyes of the 99%) would actually result in outsized stock-market returns.

Occupy once again took over the city with yesterday's May Day protest, which included a demonstration at Bank of America's (BAC) midtown headquarters, and a series of pranks including the mailing of non-toxic white powders to certain financial institutions and news outlets.

I don't know, I guess terrorism scares bring LOLZ to some of the 99%.

Oh well. At least they got the location of the protest right, since most global financial institutions are actually headquartered in midtown, far away from Wall Street.

Anyway, with the attempted re-Occupation of Wall Street once again underway, we reloaded the Occupy Wall Street Index into our handy-dandy Bloomberg Terminal to see how it fared against the S&P 500 (^GSPC).

As you can see, while the Occupy Wall Street Index was actually kicking butt for awhile, courtesy of strong action in financial stocks, it's come back to Earth and is now slightly underperforming the S&P 500.

However, it is worth nothing that last time around, the market bottomed out while Occupy was in full swing in New York.

The S&P was at 1216 on September 16, 2011, before hitting a closing low of 1099 on October 3, 2011. From there, the rally was on, and the index hit 1419 on April 2, 2012 -- a full 29% off the lows.

Coincidence? Maybe.

But I'd argue that the emergence of Occupy Wall Street in the public sphere represented enormously negative sentiment towards corporate America, indicating that the market was ripe to bottom.

And in fact, financials, as measured by the Financial Select Sector SPDR ETF (XLF), significantly outperformed for quite some time, moving up 42% from October 3, 2011 through March 26, 2012.

I wouldn't go so far as to say that it's time to buy stocks, and specifically financials, because Occupy Wall Street is here -- incidentally, I'm only about 50% net long, and short the Financial Select Sector SPDR ETF. 

But as I've learned on Minyanville from folks smarter than myself, there does seem to be some connection between social mood and risk appetite.

Therefore re-emergence of Occupy Wall Street could indicate a shift in sentiment back down toward what we saw last fall, which might be constructive in terms of forming a market bottom.

Twitter: @MichaelComeau

Position in XLF

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