Research published in mid 2007 suggests a strong link between economic activity (using the Dow Jones Industrial Average-DJIA as a proxy) and sun spot activity. There is also evidence of a strong link between sunspot activity & climate change. So does the current global crash mean we are entering a period of global cooling?
Theodore Modis, founder of Growth Dynamics, an organization specialising in strategic forecasting and management
consulting, published a paper in mid 2007, before the global financial crash. He summarised in the paper abstract that:
A correlation has been observed between the US GDP and the number of sunspots as well as between the Dow
Jones Industrial Average and the number of sunspots. The data cover 80 years of history. The observed correlations
permit forecasts for the GDP and for the stock market in America with a future horizon of 10 years. Both being
above their long-term trend they are forecasted to go over a peak around June, 2008.
A copy of his paper can be downloaded HERE.
In the chart below, the bottom line in the chart is based on sunspot numbers & the top line is Dow Jones Industrial Average (DJIA) data, both based on 11 year moving averages. The period of the Great Depression is shown by the huge deviation in the DJIA in the late 1920’s.
Unfortunately, Theodore used the correlation to make a prediction:
for the DJIA of …..13908 in mid 2008 and 7919 in early 2014, may be daring but
they have been obtained with minimal speculation.
Unfortunately for Theodore, the DJIA in July this year was hovering around 11000 and yesterday the DJIA closed at 7997, six years too early, unless OMG this is it for the next six years!!.
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