Actualis



January 2009
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The Super Bowl as a stock market indicator?

Armchair market watchers have a number of ways to predict the markets, even using football’s ultimate game to foretell what direction Wall Street will take.

Stock traders are always seeking out ways to gain an edge over their colleagues. But some go beyond tried and true forecasting practices; even going as far as pointing to the winner of the Super Bowl as an indication of how the markets will fare in the following year.

NFC up, AFC down

Here’s how this stock market legend works: If the winner is a team from the American Football Conference (the former American Football League), then the markets will drop in the months after the game. Conversely, if the winner hails from the National Football Conference (the old-time National Football League), the bulls will come out and the markets will rise. An alternate theory uses stock market performance to predict the outcome of the game.

The statistics bear it out: As of 2007 the Super Bowl Indicator has been right for 32 years out of the last 40. The SBI experienced a three-year losing streak between 1998 and 2001, but has overall been right about 80% of the time. When the Miami Dolphins won the Super Bowl in 1973 and 1974, the Standard & Poor’s 500 Index declined by 18% and 27% respectively.

Not always clear

However the system is far from absolute, with recent expansions and franchise moves clouding the waters. The 2007 Super Bowl featured the Chicago Bears and Indianapolis Colts. The Bears are an NFC team, while the AFC’s Colts trace their heritage back to Baltimore, where they were also an NFC team. Meanwhile anyone who rushed out to buy after the New York Giants won the 2008 Super Bowl probably got burned badly in the closing months of the year.

There’s no shortage of seemingly-unrelated “indicators” of future stock market activity. Let’s take a quick look at some of them:

  • If the New York Mets win the World Series, it is bad news for the markets.
  • The same holds if a horse wins the Triple Crown.
  • The January Barometer: January stock performance as an indicator for the rest of the year.
  • The Boston Snow Indicator: A white Christmas in Boston will mean a rising market in the following year.
  • The Aspirin Count Theory: As stocks go down, Aspirin sales go up.
  • The Hemline Indicator looks to the world of fashion: As hemlines rise in Paris and New York, so do the markets.
  • The Sports Illustrated Swimsuit Indicator: If the cover model is an American, the S&P 500 goes up, and if a non-American graces the cover, the markets will go down.
Crystal ball systems

The success of each of these “systems” varies greatly, but have held up enough to have their dedicated followers. As long as people have tried to predict the future there are those looking to develop a system to do it for them.

“Anyone foolish enough to bet on a game based on the stock market, or credulous enough to believe a football game can forecast the stock market, probably should hire a money manager, or a psychiatrist, or both,” said New York Times business columnist Floyd Harris.

In short, successful stock investing means paying close attention to the markets, not your favourite sports team, magazine cover or sales of pain relievers.



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