The stock market will not to return to its heady 2000 levels for several years. Why? Because the most popular color for automobiles is silver.
That’s the forecast from the Socionomics Institute, despite Thursday’s record-setting Dow. The Gainesville, Ga.-based group studies something it calls “social causality.”
Sounds like astrology to me, but for decades people have been pointing out equally strange correlations to predict stocks, with varying degrees of success.
Some say high hemlines on dresses are an optimistic sign, portending hot dates and a higher stock market. Others say that when a team from the American Football Conference wins the Super Bowl, the market will go down.
The car-color indicator is altogether new. I don’t know if it’s any better, but here’s how it is supposed to work:
The colors consumers choose reflect their moods and sentiments. The most popular color reflects the national sentiment, which drives the long-term direction of the stock market.
Silver has been the predominant color for vehicles around the world since 2000, according to DuPont, a leading maker of automotive paints. In its just-released 2006 Color Popularity Report, DuPont cited the Socionomics Institute, which studied DuPont’s 54 years of color data.
“Silver is a color that appears after a large financial boom,” said Mark Galasiewski, who authored the institute’s study. “Silver is a crowning, rest-on- your-laurels color.”
You have to be a bit of a contrarian to follow his logic. Contrarians believe that when too many people are feeling good about the stock market, it’s actually a bad sign. It means a trend of optimism has played itself out and a new wave of pessimism is soon to emerge. A boom, after all, is always followed by a bust.
“Silver reflects faith in technological progress and the belief that the future is bright,” said Galasiewski. “But when too many people start to believe that, it’s probably an indication that the trend is going to go in another direction.”
Consumers chose colors for all sorts of reasons. Sometimes color choice is driven by production cycles or design, said Marc Cannon of AutoNation, the world’s largest car dealer. “The reason silver has been so popular is that the product itself has been so stylish that you don’t need color to accentuate it,” Cannon said.
DuPont reports that silver replaced green as the predominant color in 2000. That may have been when cars became more stylish, but it was also just before the stock market busted.
Green reflected the growing pessimism that preceded the technology bust. People typically turn to green, brown and other earth tones in times of distress, when they need to feel comforted, Galasiewski said.
How does he know? Well, there is a large body of complex psychological research on the relationship between colors and mind-sets. Companies spend millions of dollars a year on this, trying to gauge consumer preferences.
The pessimistic color – green – replaced red, the flashy, optimistic finish that dominated cars in the 1980s. Recall the 1983 Prince song, “Little Red Corvette,” or the 1984 Bruce Springsteen hit “Pink Cadillac,” pink being a shade of red.
Typically, red, white and black cars are signs of optimism that coincide with bull runs on the stock market. Brown cars – like green – signal pessimism and show up during downturns. Brown cars dominated amid the lagging years of the 1970s.
Silver first emerged as an available option in 1974, and the color quickly grew in popularity during the 1974-76 stock rally. Its popularity hit one of its peaks in 1991, following the 1980s stock market rally. And now it’s back in vogue at the end of another bull run that more or less ended in 2000, in Galasiewski’s view.
He maintains it’s a bad sign. Too many people being too optimistic for too long.
From his longer-term point of view, the stock market has yet to bottom out. Remember that nasty dive in 2002? That was not the end of the bear market, he says. There’s more to come. And he won’t change his forecast until more people start buying earth-tone cars.
He bought his last car in 2005. It’s green.
Al Lewis’ column appears Sundays, Tuesdays and Fridays. Respond to Lewis at denverpostbloghouse.com/lewis, 303-954-1967 or alewis@denverpost.com.
