Watch the Stock market like a weather forecast!

6/22/2022

Watch the stock market like a weather forecast!

The pandemic caused by COVID-19 has changed policies and systems not only in the health field but also in all fields around the world. In particular, as the volatility of the stock market increases due to this phenomenon, the participation of individual investors in the stock market is increasing.

Predicting stock market indices is an important issue for investment. This is because even a small improvement in prediction accuracy can lead to better trading decisions compared to other investors.

'Value investing' is the principle of buying blue-chip stocks at low prices and long-term diversification. Benjamin Graham is a pioneer of 'value investing', which is said to be the cornerstone of investment, and the founder of securities analysis. He first established the theory of systematic securities analysis in the 1930s, creating a boom in “value investing” on Wall Street.

Here's what he said about the stock market. “The stock market has incurable emotional problems, and daily schizophrenic and nonsensical behavior is practiced. The volatility of the stock market does not have reasonable expectations, but fluctuates from time to time in response to these emotional changes.”

As Benjamin Graham puts it, the stock market is like unpredictable and volatile weather.

So, is it possible to predict such volatile weather? The result of such an attempt is the weather forecast that we often see and apply to our daily lives.

The weather forecast we are currently watching is based on science and technology that collects information such as weather, barometric pressure, wind direction, wind speed, temperature, and humidity of various places to predict and deliver the conditions of the atmosphere and the ground. However, in the past, when such scientific technology was lacking, the weather of tomorrow was predicted from the actions of animals due to movement or temperature change felt by their skin.

If you read the articles about the stock market forecast of caution, you can often see opinions about investing with a long-term perspective rather than predicting, or looking at the market with a positive mind, since the stock market is an unpredictable area. But personally, I feel like these articles are written to believe in your skin or intuition because the forecasts are sloppy.

Of course, I'm a painter and I'm not an expert on finance. I was talking simply by analogy with the weather forecast. The reason I became interested in forecasting was when I was in charge of designing a program that informs the stock market risk in the form of weather.

This program, like the weather forecast, is also a reference, but you should not blindly trust it. Just as we do not deny the existence of the weather forecast just because the weather forecast is wrong, it is meant to visualize the state of risk in the stock market like the weather, and you should not absolutely trust the weather and invest directly. It is raining, so you have to be careful enough to prepare an umbrella.

In this sense, I designed 10 weather icons based on the directions given by financial experts. Below is the final version. Conditions are like the weather, clear, sunny but a little cloudy, sunny but a lot of clouds, cloudy, a little rain, a lot of rain, rain and thunder, rain and thunder and wind, tornado, and volcanic eruption. The sun icon is in the best condition, i.e. low risk, and the volcanic eruption is the most dangerous.