The Super Bowl indicator claims that the Dow Jones Industrials Average (DJIA) rises for full years when the Super Bowl winner comes from the original National Football League, but when an original American Football League team wins, the DJIA falls. Expansion teams count for their conference. We would be the first to admit that this indicator has no connection to the stock market so the relationship is random, but there is also no arguing that the Dow has performed better when NFC teams have won over the past 50 years.
A simpler way to look at the Super Bowl indicator is to look at the average gain for the Dow when the NFC has won versus the AFC—and ignore the history of the franchises. This similar set of criteria has produced an average price return of 10.9% when the NFC has won, compared with only 4.3% with an AFC winner. An NFC winner has produced a positive year 82% of the time while the Dow has been up only 61% of the time when the winner came from the AFC.
Interestingly, the New England Patriots have an even worse record for markets than the AFC as a whole, as the chart below shows. Of the eight previous times the Patriots have played in the Super Bowl, the Dow has been up for the full year an even 50% of the time, with an average gain of just 0.3%. Years where they won fared the worst, seeing an average loss of 4.1%.
Welcome to our latest issue of ValueWalk’s hedge fund update. Below subscribers can find an excerpt in text and the full issue in PDF format. Please send us your feedback! Featuring Point72 Asset Management losing about 10% in January, Millennium Management on a hiring spree, and hedge fund industry's assets under management swell to nearly Read More
Those who love Tom Brady will be glad to see him starting in his record seventh Super Bowl, but those who don’t will be interested to note that markets have actually fallen for the full year 67% of the time (four out of six) that he has started in the big game, with an average loss of 7.2%. However, to be fair two of those years were extreme outliers, with 2002 seeing the largest decline in the Dow (-17%) since 1977, and 2008 seeing an even larger drop of -34%, the largest since the Great Depression. Even the most ardent Patriots detractors can’t realistically fault Tom Brady or Bill Belichick for the Financial Crisis.
So what does this mean for the upcoming Super Bowl? Per Ryan Detrick, Senior Market Strategist, “It means investors should be rooting for the NFC’s Atlanta Falcons (though LPL employees in the Boston home office may disagree). As an expansion team in the NFC, an Atlanta victory would point toward a positive and above-average year for the Dow, while the Patriots, an original AFL team that morphed into the AFC, would signal a down year and below-average returns. Whatever happens, hopefully everyone enjoys their Super Bowl parties and are able to wake up for work on Monday morning.”
Article by LPL Research