THE SUPER BOWL INDICATOR I hope everyone’s excited for Super Bowl 50 this Sunday!
What’s that? You don’t like football?
Well you better watch anyways, because the winner of the Super Bowl will determine if stocks are heading up or down in 2016.
Are you a Carolina Panthers fan? You might want to start buying stocks. Denver Broncos fan? Better start selling.
THE SUPER BOWL INDICATOR
Okay, so the winner of the Super Bowl won’t really have any effect on stocks – but there is a very interesting phenomenon going on (even if it is random).
It’s called the Super Bowl Indicator:
- A win by an original National Football League team—from the days when there was an NFL and an American Football League, before the 1966 merger pact—means the market will be up for the year.
- A win by a descendant of the AFL sends the market down.
- Teams created since the merger count for their conference, National or American.
This means that a win by Peyton Manning and the Broncos on Sunday would keep the stock market in negative territory for the rest of the year. However, if Cam Newton and the Panthers win their first Super Bowl, then the stock market will rise by the end of the year.
Incredibly, the Super Bowl Indicator has had an 82% success rate, correctly predicting the direction of the Dow Jones Industrial Average’s movement in 40 of 49 Super Bowl years. The Indicator currently has a 7 year streak going.
The last time the Super Bowl Indicator failed was in 2008, when the New York Giants (NFC division) won the Super Bowl (which meant stocks should’ve gone up for the year). Of course, 2008 marked the start of the Great Recession, with the stock market suffering one of the largest downturns since the Great Depression.[Can you really fault the Super Bowl Indicator though? 2008 was the year of the famous David Tyree Helmet Catch – which has become one of the most iconic plays in Super Bowl history and set up the New York Giants for the game-winning TD with 35 seconds left to seal the upset victory.]
The Super Bowl Indicator was popularized by Wall Street analyst Robert H. Stovall, who credits the original idea for the indicator to a NY Times sportswriter, Leonard Koppett, who discovered the correlation back in 1978.
Stovall, now 90, is the first to admit that “There is no intellectual backing for this sort of thing except that it works.”
Obviously he’s right. The Super Bowl Indicator is actually a great example of correlation without causation, also known as a spurious relationship.
SUPER BOWL 50: THE DENVER BEARS VS. THE CAROLINA BULLS
But correlation without causation doesn’t mean we can’t have fun with the Super Bowl Indicator.
So what do you think?
With the DJIA down 6% for the year so far, does that mean the underdog Broncos have a good shot at pulling off the upset? Or is it the stock market that will pull off the upset, rallying back to positive territory on the arm and legs of Cam Newton?
