The Curious Investor

It seems a lot of “market curiosities,” or stock market urban legends, tend to revolve around beginning of the year happenings. I guess that’s because we’re all looking for an edge or some kind of crystal ball to reveal to us what will happen to our money as the new year unfolds. Here’s one that’s a little bit sad for me. I’m a Patriots fan, you see, and I’m not sure that waiting a week to write this post is enough. I’m getting a little misty eyed as I write.  But, I’ll press on.

Basically, the Super Bowl Indicator works like this. After the NFL-AFL merger in 1967, if a team from the original NFL wins the Super Bowl, then the Dow is likely to go up during that year. If a team from the original AFL wins the Super Bowl, then the Dow is likely to fall that year. Basically, this boils down to NFC teams being bullish and AFC teams being bearish. Notable exceptions include the Indianapolis Colts (BOO!), Pittsburgh Steelers, and Baltimore Ravens (the original Cleveland Browns) which were all NFL teams prior to the merger but which now play in the AFC.

There are a number of expansion teams not covered by this theory: the Tampa Bay Buccaneers, Seattle Seahawks, Carolina Panthers, Jacksonville Jaguars, and Houston Texans. Furthermore, there’s some controversy over which Cleveland Browns incarnation, the Ravens or the current Browns, counts as the true original NFL team.

Despite these discrepancies, expansion teams haven’t really factored into Super Bowl outcomes with the exception of 2003 Super Bowl where the Buccaneers won. Excluding this Super Bowl, from 1967 to 2007, this indicator has been right 32 of 40 years. It was right 28 of 31 years from 1967 to 1997. Hit an 0 for 4 skid from 1998 to 2001. Then, rebounded by going 4 for 5 from 2002 to 2007 (the 2003 win taken out).

So, what’s this all mean? Well, as with most stock market myths, I wouldn’t suggest trading on it. While it’s surprisingly more accurate than most stock market experts could ever hope to be, always remember this little tenet, “correlation does not equal causation.”

But, if we are to believe in the Super Bowl Indicator, the silver lining to the Patriot loss to the Giants may be that the market is set up for a pretty good rally. The Giants are an old NFL team and the last two times they won the Super Bowl, 1987 and 1991, the Dow was up 2.3% and 20.3% respectively. The last two times the Patriots lost the Super Bowl, 1985 and 1997, the Dow was up 22.6% respectively. Given the current sentiment about the economy, we probably need any kind of good omen we can find.

So, does the Super Bowl Indicator mean that the Patriots do deserve to be hated (especially by investors)?  I don’t think so. The one time the Super Bowl Indicator was incorrect in the last 5 years was 2004 when the Patriots won and the Dow was up 3.6% by the end of the year. Furthermore, in 2005, when the Patriots won again, the markets only fell .6%. So, here’s to next season and hopefully another dominant Patriots team. (One that won’t fold in the last game…) And, here’s to the Giants helping to bring that bullish sentiment back to my portfolio.

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