Last Sunday was the biggest (unofficial) holiday of the year in the U.S., as just over 100 million people tuned in to the Super Bowl, the American football championship. They watched the Philadelphia Eagles (from the U.S. state of Pennsylvania) unexpectedly beat the New England Patriots (from the northeast of the U.S.).
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Of course, the Super Bowl has nothing to do with stock markets. But it can still be a predictor of stock market movements… like the “January barometer” and the Winter Olympics.
The Super Bowl Indicator
This is where the “Super Bowl Indicator” comes into play.
Professional American football is divided into two conferences, the NFC (National Football Conference) and the AFC (American Football Conference). The Super Bowl is played between the winners of these two conferences.
Since 1967, when a NFC team (represented this year by the winning Philadelphia Eagles) has won the Super Bowl, the U.S. stock market has returned an average of 13.4 percent for the year. That’s better than the S&P 500’s average return of 11.2 percent over the period. But when the AFC team has won, the market has posted an average return of only 8.8 percent.
So it’s good news for U.S. stocks this year, if you believe in the Super Bowl Indicator, because the NFC was triumphant.
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However, when looking at Asian stocks, the results are strikingly reversed, with an even bigger swing towards higher returns when an AFC team wins.
So this year’s Super Bowl result implies less cause for optimism if you are invested in any MSCI Asia ex Japan stocks. That said, there’s no scientific basis for the Super Bowl Indicator. And there’s also no basis for the January barometer. And yet, it also seems to work (it’s better for U.S. markets). In investing, it’s important to remember that the past has no bearing on the present. But historical indicators like this can give some guidance about what markets have done before.