Is there actually a difference in the annual performance of the stock market, depending on who wins the Super Bowl? Should I really consider altering my investment plans based on who wins? Let’s explore this interesting consideration as we approach Super Bowl LII (or Super Bowl 52 if you didn’t take Latin in high school).
The Super Bowl
The inaugural Super Bowl took place in January 1967. The Green Bay Packers, who had already won several NFL championships in that decade, beat the AFL champion Kansas City Chiefs.
The Super Bowl developed so that the NFL (National Football League) champions could play the AFL (American Football League) champions. The NFL started in 1920, while the AFL began its
first season in 1960. Before the 1970 season, the AFL joined the NFL, forming the NFC (National Football Conference) and the corresponding AFC (American Football Conference). To even out the number of teams in each league, the Pittsburgh Steelers, Cleveland Browns (now Baltimore Ravens), and Baltimore Colts (now in Indianapolis) moved to the AFC.
Of the 51 Super Bowls already played, the NFC has won 26 and the AFC, 25. The NFC and former NFL teams have won 36 games, while the old AFL teams have won 15 times. The most successful teams include the Pittsburgh Steelers, who have won 6 Super Bowls, the San Francisco 49ers and Dallas Cowboys, with 5 victories each, and the Green Bay Packers and New York Giants, with each with 4 wins. All of these teams are in the NFC/former NFL group. The leading AFC team is the New England Patriots, with 5 Super Bowl victories.
The Super Bowl & the Stock Market
Oddly enough, a pattern has emerged, which has been called the Super Bowl Indicator. When the winner is an NFC team or a former NFL team (Steelers, Colts, or Ravens (formerly the Browns)), the stock market has, more often than not, risen that year. When an AFC team wins, the stock market has fallen more often than not.
That of course, did not happen last year as the New England Patriots defeated the Atlanta Falcons 34-28 in what many consider the greatest Super Bowl comeback in history. And in case you forgot, last year’s Super Bowl was played on February 5th and on February 6th, the DJIA jumped 186 points – which happened to be its best day of the year up to that point on its way to closing above 20,000 (not for the first time, that was on January 25th) and a yearly return of 25%. And the year before? Well the AFC Champion Denver Broncos defeated the Carolina Panthers 24-10 and the DJIA rose by more than 13%.
So, Where Does This Indicator Come From?
New York Times sportswriter Leonard Koppett originally introduced this “Super-Bowl indicator” in 1978. He observed that in 10 of the 11 Super Bowls at the time, the outcome of the Super Bowl foretold the direction of the DJIA.
He found that, when an old AFL team won, the market fell for the year; when an old NFL team won, the market rose.
Koppett’s observed pattern has, strangely enough, continued to hold true. For 40 of the 51 Super Bowl years, the Super Bowl Indicator has worked. This means that the Super Bowl Indicator has predicted the annual direction of the DJIA for the year almost 80% of the time. When considering the year-end status of the S&P 500 – considered a more broad representation of the stock market by many – the Super Bowl Indicator has worked for 33 of the 51 Super Bowl years, for a rate of 65%.
So, how does this play out for individual teams? For the leading teams in the NFC/former NFL group, very well. After all 6 of the Steelers’ Super Bowl victories, the DJIA rose by the end of the year. In 4 of the 5 years following a 49ers victory, the DJIA rose. In 4 of the 5 years following a Cowboys victory, the DJIA rose. The DJIA rose for the year after all 4 of the Packers’ victories and after 3 of the 4 Giants’ victories. After all 3 of the Washington Redskins’ victories, the DJIA rose for the year.
For the AFC teams, not so well. The DJIA fell for the year after 3 of the Patriots’ 5 Super Bowl victories. After all 3 of the Oakland/Los Angeles Raiders’ victories, the DJIA fell for the year. Even the Miami Dolphins undefeated season, capped by victory in the 1973 Super Bowl, did not save the AFC from its curse. The DJIA sank by the end of 1973.
No matter how heroic the performances of Tom Brady, John Elway, or Joe Namath, an AFC winner generally did not bode well for the DJIA.
One explanation is pretty straightforward: the DJIA usually increases as it has in 37 of the past 51 years. And the NFC/old NFL teams usually win the Super Bowl, as has happened 36 of 51 times. Both occurred in the same year on 29 occasions. However, it is still striking that the direction of the DJIA has been predicted accurately almost 80% of the time since 1967 simply by the conference to which the Super Bowl winner belongs.
So, with the New England Patriots as 4-point favorites over the Philadelphia Eagles, does that mean that 2018 is “favored” to witness the stock market’s decline? While there is an interesting correlation between the Super Bowl victor and the stock market, there is of course, no causation.
The Steelers, Cowboys, 49ers, and Patriots simply do not have any influence on the DJIA for the year (sounds obvious, doesn’t it?). Don’t credit the Steelers’ legendary defense or blame the Patriots’ much-celebrated passing game for the direction of the market, unless you find it amusing to do so. Maybe the term Deflategate has nothing to do with air pressure in footballs?
People like to look for patterns in random data because it makes life more interesting. However, the key to successful long-term investing, of course, lies elsewhere. Still, it’s fun to be an armchair analyst/quarterback looking at unique measurements that have nothing to do with traditional financial measures.
But I’m curious, is this why so many people are rooting against the New England Patriots?
*© 2018 RSW Publishing. All rights reserved. Distributed by Financial Media Exchange.