Sunspots and Bull Markets: A Cosmic Connection?
The topic we'll be discussing today is 'sunspots.' If you browse through investment communities online, especially the more niche ones, you'll sometimes come across the idea that there's a connection between the sunspot cycle and stock market bull runs. The idea of an astronomical phenomenon influencing the price of human assets feels a bit like science fiction.
Wow, Kurumi-chan has heard of that too! When the sun is blazing, the stock market burns hot right along with it! Doesn't that sound like a totally romantic and epic story? It’s like the heavens are sending us a signal, saying 'Now's the time!'
Romantic? It just seems like an old human habit to me. A desperate attempt to find order and meaning in the face of vast, incomprehensible forces. As I understand it, that sunspot story is much older than you might think.
Mikael is correct. The origin of this story dates back to the 19th-century British economist, William Stanley Jevons. He observed that sunspots varied on an approximately 11-year cycle and argued that this influenced the climate in India, which determined crop yields, and in turn created a chain reaction affecting grain prices and financial markets in Britain, then the center of the global economy.
That argument might have had some rationality in its time. Even though the Industrial Revolution was underway, the foundation of the economy was still agriculture. Weather was directly linked to production, and production dictated prices and economic conditions. Solar Activity → Earth's Climate → Agricultural Output → Economic Situation. Something like that. But placing the 21st-century global financial market on the same level as the 19th-century grain market is like trying to predict a Ferrari's performance by looking at a horse-drawn carriage.
Oh, Mika-pi, you're always so rigid! Of course, even Kurumi-chan knows that a solar flare isn't going to make the Nasdaq go up or down tomorrow! That's a silly thought! But that's not what's important!
The point isn't the 'scientific fact,' it's that 'people love the story'! Listen carefully, my Lord! People hate things that are complex and difficult. A single sentence like 'The sun's energy will make us rich!' is far more appealing and easier to understand than reading a fifty-page monetary policy report from a central bank, isn't it? Stories are powerful!
Kurumi's perspective aligns with what behavioral economics calls 'Narrative Economics.' This concept was put forth by Nobel laureate Professor Robert Shiller. It's the theory that certain stories can spread through society like an epidemic, substantially influencing people's economic decisions, such as consumption or investment. The sunspot theory itself doesn't have scientific power; rather, it functions as a kind of 'Financial Folklore.'
That is precisely the point we must be wary of. The 'power of story' that Kurumi speaks of often becomes another name for 'collective madness.'
Consider the Tulip Mania in the 17th-century Netherlands. The story that 'a single tulip bulb is worth the price of a house' mesmerized people. What about the dot-com bubble of 2000? A powerful narrative that 'the Internet and the New Economy will grow forever' dominated the market. We all know how those stories ended.
The sunspot theory is no different. The weaker the evidence, the more mystically and attractively the story is packaged. And when a few people start betting money on that story, the price moves, just a little. Then others see this and jump in, thinking, 'Hey, maybe there's really something to this!' This process repeats, creating a bubble without substance. I have seen such things happen many, many times. This isn't 'cosmic energy'; it's merely a mirage created by human greed and folly.
Ugh... Mika-pi, must you always pour cold water on everything? Kurumi-chan thinks even the mirage is fun! If everyone invested rationally and logically, the market would be so boring! Isn't it because of these irrational movements and unpredictable whims that the market feels like a living creature?
And look! There are even people online who sell paid reports under the name Financial Astrology! The fact that people pay for it means there's a demand, right? Whether it's real or fake, someone is making money buying and selling that 'story'! This is a completely new business model! What do you think, Myu-tan? Maybe we should try something like 'Recommended Coins by Zodiac Sign, Analyzed by an Android'...?
...That does not align with the manufacturing purpose of my operational circuits. However, as Kurumi says, it is true that such 'belief' itself forms a market. It may be small, but it certainly exists. This is an entirely different level of approach from analyzing an investment's fundamentals. It's a game of analyzing the 'psychology of the people' who believe the theory and predicting their next move.
Ultimately, we return to the same point. The sunspot theory should be viewed not as an 'investment theory' but as one of many 'tools for observing the psychology of market participants.'
For instance, what if this kind of pseudoscience suddenly starts being discussed by many people? I would interpret that as a 'sign of an overheating market' or an indicator that 'investors are so anxious they are losing their rational judgment and clinging to emotional stories.' You shouldn't be looking at the actual sun, but reading the expressions of the people looking at the sun.
Oh, that's a wickedly smart idea! You're brilliant, Mika-pi! So this story isn't an 'investment method to follow,' but more like a zoo where we can observe 'people who think like this'! And we need to watch carefully because sometimes those animals might escape their enclosures and shake up the market!
That is an accurate analogy. Master, in conclusion, it is rational to assume that there is no direct causal relationship between sunspots and asset prices. However, the phenomenon of this old folklore surviving and being discussed in a corner of the market tells us a great deal. It shows how irrational the market can be, what power a strong narrative can have, and how hard humans try to find patterns in the unknown. This seems less a matter of investment technique... and more a matter of philosophy for understanding humans and the market.