The Wall Street Waltz: 90 Visual Perspectives, Illustrated Lessons From Financial Cycles and Trends, Revised and Updated Edition

Chart 86

Bear Markets versus Bare Knees

Do you get a leg up on others by focusing on interest rates or by keeping your interest on rating girls' legs? Well, Wall Street may remain among the last bastions that feminists can't reform, and some Wall Streeters think girls' legs are a more telling indicator of future prices than more traditional measures displayed throughout this book and elsewhere. Enter the hemline indicator. Amazingly enough, it's taken quite seriously.

Its proponents argue that the same psychological forces that move investors to excessive swings of optimism and pessimism also dominate noninvestors and flow easily into fashions. This chart shows what they mean. Short and racy hemlines that expose lots of leg often have been associated with bull markets. Long Victorian-looking hemlines often have been associated with bear markets.

Take the pre-World War I period. As shown in Chart 27, stocks didn't do much for anyone then. Girl watchers didn't get much to cheer about either. Dresses were long, and so were bear markets. But the 1920s brought new enthusiasm to stocks and girl watchers. Hemlines shortened, and by 1929 fashionable flappers wore skirts that were daring—even by today's standards. As stock prices collapsed in the 1930s, so did hemlines, returning to cover all but the ankle. The market went nowhere in the 1940s, and neither did hemlines. But then with the rising markets of the 1950s, hemlines started moving back up. As girl watchers' spirits brightened, ...