The Stock Market’s Super Bowl Indicator Is More Accurate Than You Think

Dow Jones
Yesterday

U.S. equity futures will open for trading on Sunday around half an hour before the Seattle Seahawks and the New England Patriots face off during Super Bowl LX in Santa Clara, Calif. However, investors might want to wait for the final whistle of the game before they start preparing for Monday’s opening bell.

Winston Churchill once said that democracy is the worst form of government, apart from all the others. The Super Bowl indicator, a decades-old piece of Wall Street folklore, might be the worst form of prediction, but it’s weirdly one of the most accurate.

Developed in 1978 by New York Times sportswriter Leonard Koppett, the indicator suggests that a Super Bowl victory for the NFL’s National Football Conference (NFC) representative portends a bull market for stocks, whereas a win for the American Football Conference (AFC) team signals a bear market.

Absurd, right? However, starting from Super Bowl I, held at the Los Angeles Coliseum in 1967, and tracking market reaction to the various champions all the way up to 1997, the Super Bowl indicator had a 90% success rate. It’s slumped to around 40% since then, but it still provides a 70% accuracy rate over its nearly 60-year data set.

But there’s more.

“First things first, don’t ever invest based on who wins the Super Bowl, what will happen at halftime, or the coin toss, or how bad the refs will be,” said Ryan Detrick, chief market strategist at Carson Group, in a note.

“The Super Bowl Indicator is totally random, but it turns out that when looking at the previous 59 Super Bowls, stocks do better when an NFC team wins the big game,” he added.

A lot better, in fact. Detrick notes that the average annual gain for the S&P 500 since 1967 has been 9.2%, with 43 up years and 16 decliners. However, when NFC teams have won the Super Bowl, the index has averaged a 10.2% annual gain and had positive years nearly three-quarters of the time after those victories. For the AFC victory years, the average yearly gain is 8.1%, with positive years for the benchmark coming in at 69%.

That’s from a data set in which the NFC has 30 Super Bowl victories, and the AFC has 29. Yet according to Detrick’s number-crunching, the size of the actual victory itself may be more important.

“That’s right, when it is a single-digit win in the Super Bowl, the S&P 500 is up less than 7% on average and higher about 62.5% of the time. A double-digit win? Things jump to 11% and 80%,” he said, adding that these figures are in no way related to actual stock performance.

Now, sports are all about momentum, and any gambler will tell you that winning streaks are real—so putting all your financial market faith in this year’s NFC champion, the Seattle Seahawks, might not be your best bet.

“Stocks have gained over the full year 12 of the past 13 times when a team from the AFC won the championship, going back 21 years,” he added. “In fact, the only time stocks were lower was in 2015, when the full year ended down -0.7%.”

And if all of this metadata wasn’t spooky enough, here’s a quick reminder as to who contested the Super Bowl in 2015: The New England Patriots and the Seattle Seahawks.

Markets resume their regular programming on Monday, of course, following a big Friday rebound that saw the Dow Jones Industrial Average close north of the 50,000 point level for the first time on recordand the S&P 500 post itsstrongest one-day gain since May.

So enjoy the game, regardless of which team you’re supporting—or whether you think the outcome will have any impact on stocks over the coming year. But if you do…well, at least there’s some data to support it.

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