Investors who believe in the "Super Bowl Indicator" will be rooting for quarterback Russell Wilson, head coach Pete Carroll, and the rest of the Seattle Seahawks to win Super Bowl XLVIII this Sunday. And not only in hopes of seeing another enthusiastic post-game interview from cornerback Richard Sherman (although that would be a perk).
True, the Super Bowl Indicator is hokey – but it's also strangely accurate. This theory has been correct 81% of the time.
The legend of the Super Bowl Indicator states that if a team from the premerger National Football League wins the Super Bowl, the markets will rise that year. If a team from the premerger American Football League wins, a bear market is in store.
Some purists (or cynics) have said the Super Bowl Indicator doesn't apply in 2014. The Seattle Seahawks were introduced as an expansion team in 1976.
To get around that, expansion teams of the National Football Conference (NFC) are typically grouped with the bulls, and expansion teams of the American Football Conference (AFC) with the bears.
Since the Denver Broncos are one of the original 10 AFL teams, they represent a bear market in 2014. But if Seattle walks away with the Lombardi Trophy, there's an 81% chance the markets will rise this year.
Admittedly, the cards are stacked for the bull market teams… take a look…
Super Bowl Indicator: Where the 81% Success Rate Comes From
There were only 10 original AFL teams, and if you add in the two AFC expansion teams -Houston Texans and Jacksonville Jaguars – only 12 of the 32 NFL teams represent a bear market.
Even the Baltimore Ravens are considered "bulls": The Baltimore Colts were an original NFL team, so the Baltimore Ravens and Indianapolis Colts both get lumped in with the bulls.
The Ravens took the Super Bowl last year – and the Dow gained 26.5%.
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Now the Dow has posted a yearly gain 72% of the time since 1966. So the odds have been in favor of the market rising each year.
Likewise, in any given year the odds are that an original NFL team or NFC team will win the Super Bowl, as they comprise 20 of the 32 teams.
The Super Bowl Indicator was correct 28 of the first 31 Super Bowls. It's cooled off since then, but has had a nice little five-year run of being correct since the Pittsburgh Steelers (original NFL) defeated the Arizona Cardinals in Super Bowl XLIII.
Notable Dow gains include a 1975 gain of 38% after the Pittsburgh Steelers won Super Bowl IX, a 1989 gain of 27% following a San Francisco 49ers victory in Super Bowl XIX, and a 2003 gain of 25% when the Tampa Bay Buccaneers won Super Bowl XXXVII.
We suggest putting more research into your investments than simply waiting to see who hoists the Lombardi Trophy – but the Super Bowl Indicator does add another fun layer of intrigue to the game.
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Investors Should Root for Seattle… Maybe
- The Wall Street Journal:
Is it Time to Sack the 'Super Bowl Indicator'?