Do low hemlines spell bad news for the market?

 @ibtimes
on September 07 2007 6:30 PM

Lower hemlines are coming back in fashion for spring and that could spell bad news for the U.S. stock market.

The higher the hemlines, the better the outlook for stocks, according to a popular, but frequently disputed, theory. When hemlines drop, watch out -- the Dow Jones Industrial Average is likely to fall, the theory goes.

The past few fashion seasons, short skirts have ruled and, this spring, stocks rallied.

The hemline theory proved on the money as the Dow hit 14,000 for the first time this summer, and the Standard & Poor's 500 Index set a record.

But in recent weeks, stocks have plunged following a jump in foreclosures on subprime home loans for borrowers with poor credit that hit bank credit lines and roiled the bond market.

At this week's fashion show extravaganza in New York, hemlines are markedly lower.

Designers Nicole Miller, BCBGMAXAZRIA and Josh Goot showed hemlines at the knee for spring, Generra's hems were mostly mid-thigh, as were those at Erin Fetherston and Miss Sixty, and dresses were knee-length or longer at Nary Manivong.

Tracy Reese introduced dresses that fell some 3 inches (7.6 cm) below the knee.

The long, printed daytime dress which takes us back to the late '70s will be the iconic item for spring, said David A. Wolfe, creative director of The Doneger Group trend forecaster.

Analyst Ralph Acampora of Knight Capital Group said the comeback of the long skirt may be quite telling.

In the roaring '20s, flappers' dresses got high. The market was going strong, he said. When the 1929 market crash came, hemlines fell, he said.

I don't think fashion leads the Street. It's the other way around, Acampora said.

Bolstering the hemline theory, miniskirts were in vogue and stocks rose in the 1960s.

By the early 1970s, the Arab oil embargo forced Americans to endure gas pump lines, the economy suffered and the popular style was the ankle-length maxiskirt.

Designer Tracy Reese doesn't buy it.

I'm not thinking, 'Things are tough out there. I'm taking the lengths down,' she said. Longer looks fresher. The dresses are bias cut and fluted, so the length is more graceful.

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