What does the Super Bowl have to do with your portfolio? Unless you play for the Philadelphia Eagles or the New England Patriots, probably nothing.
And yet, a phenomenon called the Super Bowl Indicator has apparently linked the winner of the big game to the movement of the stock market for the coming year with about 80 percent accuracy since it was first noted in the 1970s.
Say what now?
Yup. The indicator’s origin is credited to New York Times writer Leonard Koppett, who penned a column about it in 1978. He noted that if a team hailing from the old National Football League (now part of the National Football Conference, since it merged with the American Football League in 1966) won the Super Bowl, the stock market would rise and end the calendar year higher than it began. If an old AFL team won (now part of the American Football Conference), the opposite would occur.
That means if the NFC’s Eagles win Super Bowl LII, this bull market will continue, and 2018 will be another up year for stocks. (That may be discouraging news for those who subscribe to this belief, as the Patriots are favored to win.)
So fly, Eagles, fly?
Sure. But not for the sake of your portfolio. Logically, we know that who wins a football game has no effect on the direction of the market—no matter how frequently the indicator gets it right.
In fact, we could likely put together a whole slew of stats that connect random events to market performance. “The fact is there are thousands of sporting events we could point to, with millions of permutations,” says Frank Murtha, Ph.D., co-founder of behavioral finance research and consulting firm MarketPsych Insights. “If you have enough data points, you will generate coincidences.”
That’s basically Koppett’s conclusion, too. “What does all this mean? Absolutely nothing on any rational level—and that’s exactly the point,” he wrote. “Just because two sets of numbers coincide in some way, don’t leap to the conclusion that one set ‘causes’ the other.”
But how can the indicator be right so consistently?
It’s statistically likely that both an NFC team will win the Super Bowl and the stock market will go up in any given year. In a 2014 Wall Street Journal column, financial analyst Robert R. Johnson writes, “Looking at history since 1966, there is a 70.2 percent likelihood that an [NFC] team wins the Super Bowl, and there is a 72.3 percent chance that the Dow advances in a given year. Given these probabilities, by simple chance, the Super Bowl Indicator should be correct 59.1 percent of the time.”
Otherwise, chalk it up to coincidence. The most important takeaway from Johnson’s note for investors: The market is more likely to rise than fall.
What can I do with this information?
Don’t take it to heart. You might recognize that using the Super Bowl Indicator to dictate your investing strategy is a silly idea, but remember other, more-rational-sounding Wall Street maxims—like “Sell in May and go away”—similarly use tricky numbers to predict the direction of stocks. The truth is that we never know with certainty which way the market will go, and investing by following any such pithy sayings is akin to trying to time the market, which nobody can do with 100 percent accuracy.
You’re always better off sticking with your long-term investing strategy and taking these phenomena for what Murtha points out that they really are: “fun, quirky little anomalies.”
January 26, 2018