Posted by lplresearch
Thursday, April 7, 2022
This year’s Masters Golf Tournament starts today at the Augusta National Golf Club in Georgia. As usual, the world’s top players will be competing for the coveted green jacket, but as often also seems to be the case all eyes will be on Tiger Woods. The five-time Masters winner has not played in an official event since a few months before he was involved in a horrible single car accident in February 2021. At the time, doctors considered amputating his right leg and suggested he would be lucky to walk again, let alone play golf, with the local sheriff in Los Angeles stating he was “lucky to be alive”. Just teeing off at 10:34 ET, on a course he probably knows better than any other player in the field, will perhaps his greatest comeback.
“Of course, we’d never suggest investing based on this but historically if Tiger wins the Masters returns have been below average that calendar year but above average the following year,” joked LPL Quantitative Strategist George Smith. “After such a roller-coaster career it’s perhaps no surprise that Woods winning the Masters hasn’t been a reliable stock market predictor and that he’s neither a bull nor a bear but simply a tiger.”
As shown in the LPL Chart of the Day, when Tiger has won the Masters the S&P 500 has gone on to close the year with a 5% average gain, compared to a 10% gain if anyone from the rest of the field wins. However, perhaps fitting the comeback nature of Woods’ later career the stock market story improves the year following a Tiger triumph, with a 12% average return the next year, compared to 7% for any other winner.
Given Tiger is currently a VERY long shot to win his sixth green jacket, we thought we would also take another lighthearted look whether the nationality of the Masters winner had any predictive power for the stock market. Spoiler alert: the answer is no as our model has firmly found the bunker in prior years, but we are confident we might make it to the fairway, or even the green, this year!
We first looked at this in 2020 when American Dustin Johnson won which our model predicted would have seen an 8% annual return; however, the market scored an eagle with a 16% calendar year return (in our defense this was an odd Masters tournament as it was played in November due to COVID). Then in 2021 Hideki Matsuyama broke our model becoming the first Japanese player to win the green jacket and the market posted a hole-in-one-like 27% annual return.
We looked at the nationalities of all Masters winners since 1974, when South African Gary Player won, and how the S&P 500 Index performed that calendar year. The 2021 Matsuyama win and impressive stock market returns propelled Japan near to the top of the leaderboard, but Australia is still a few strokes ahead. Fiji and South Africa look to be bogeys or even double bogeys for stock market returns – clearly not making the cut – while a U.S. winner normally coincides with average returns.
Based on this data, we are going to throw our irons behind Australia’s Cam Smith. He is one of the favorites coming into the tournament due to his recent scintillating form –two victories and a fourth place in his last five tournaments – and the course may play similar to the sandbelt courses that he grew up on in Australia. The only previous time an Aussie triumphed was in 2013 when Adam Scott stunned the field to take the trophy and the S&P 500 stormed into the clubhouse with a calendar year 30% return! Given the sample size of one, which would make any statistician wince, we certainly would not base any investment decisions on this data, but at least it should make the next few days of golf a fun watch.
Let’s go Cam! (and Tiger!)
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