Some say there is actually a difference in the performance of the stock market based on which team wins the Super Bowl. Have you heard this one before? It’s called the Super Bowl Indicator. Individuals are making financial predictions and decisions based on this particular sporting event. It’s an interesting topic that has been discussed for many years.
History of the Super Bowl
The Super Bowl came about so the AFL (American Football League) champions could play the NFL (National Football League) champions. The AFL had its first season in 1960, while the NFL began in 1920. The AFL joined the NFL right before the 1970 season, forming the National Football Conference (NFC) and the American Football Conference (AFC).
Out of the 52 Super Bowls previously played, the AFC has won 25 and the NFC has won 27. The big winners have been the Pittsburgh Steelers with six wins, the Dallas Cowboys, San Francisco 49ers, and New England Patriots with five wins each, and the New York Giants and Green Bay Packers with four wins.
So What Does This Have to Do With the Stock Market?
Interestingly enough, if you look at the statistics from the last 52 years, you can see that a pattern has materialized. This pattern has been named the Super Bowl Indicator. However, if you look at the data from the last ten years, one of the most extended bull markets in history, the model doesn’t exactly hold up.
When the winner is an NFC team or a former NFL team, the stock market has gone up that year more frequently than not. When an AFC team wins, the market has fallen more frequently than not.
But what about recent years? The Philadelphia Eagles beat the New England Patriots 41-33, and the Dow Jones Industrial Average (DJIA) lost about 6%. The Patriots defeated the Atlanta Falcons the year before, and the DJIA swelled 25% that year. One more year back, the Carolina Panthers were beaten by the AFC champs, the Denver Broncos, with a score of 24-10, and the DJIA went up more than 13% that year.
So the indicator was incorrect for three years in a row, as well as in 2009 and 2013. Over the last ten years, the indicator was accurate 50% of the time.
Who Came Up With the Super Bowl Indicator?
Leonard Koppett, a New York Times sportswriter, introduced the "Super Bowl Indicator" in 1978. He observed that when an NFL team won, the DJIA went up for the year, and when an AFC team won, it went down. Koppett’s indicator seemed to be correct for many years—for 40 of the 52 Super Bowls, to be exact.
If we look at the S&P 500 end-of-year numbers, the indicator has been correct 33 times out of 53 Super Bowl years, which is a rate of 62%.
But How Can This Be? Football and Markets?
There is actually a simple explanation for what we see here. The DJIA typically increases, as it has done for 37 out of the last 52 years. Also, the NFC/prior NFL teams usually win the Super Bowl, as they have done 37 of 52 times. In 29 of those years, they both occurred during the same year.
To those of us watching this, seeing the DJIA predicted correctly according to which conference wins the Super Bowl almost 77% of the time, it truly does seem like something is going on. However, while there is no doubt that there is a fascinating correlation between which team wins the Super Bowl and the fate of the stock market, there is naturally no causation. This is a classic example of how our brains create patterns where none exist, a topic explored in depth in how behavioral investing can impact your financial goals.
You simply cannot give credit for market turns to the Patriots’ much-lauded passing game or the Steelers’ celebrated defense. In typical fashion, people look for rational, predictable patterns in random data in order to fulfill a personal need to make sense of something nonsensical.
The secret to successful long-term investing does not lie in football indicators. Avoiding self-sabotaging investment decisions means recognizing that behavioral investing errors based on market whims, fads, or folklore will never outweigh careful and thoughtful consideration of your goals and risk tolerance. Understanding the power of markets and maintaining discipline matters far more than seeking patterns in randomness.
