Wall Street will be rooting for a New York Giants victory over the New England Patriots during this year’s Super Bowl and not just because Big Blue is the local team. A Giants win in Sunday’s game may be a positive omen for the United States’ economy during the next twelve months.
According to an interesting indicator, if a team from the NFC wins the Super Bowl, the S&P 500—a stock index consisting of 500 large-cap common stocks actively traded within the United States—will gain during the following year. If a team from the AFC registers a victory, the market will decline. There may not be any scientifically proven research to support the claim, but the “Super Bowl Stock Market Indicator,” for lack of a better term, has held with an astonishing 78% accuracy since 1967, the year of Super Bowl I.
The Super Bowl Indicator is not a sure-fire basis for a solid investing strategy. It has failed in the past. In 2008, for example, after the Giants beat the Patriots in Super Bowl XLII, the S&P 500 tumbled 38.49%, spurring a national financial crisis.
The unique indicator has both proponents and critics amongst Wall Street insiders. “It’s a rather formidable statistic,” said Bob Stovall, 85, a managing director and market strategist for Wood Asset Management in Sarasota, Florida. Meanwhile, Bob’s son, Sam Stovall, a chief investment strategist for S&P Capital IQ doesn’t view the indicator as legitimate. The first thing I ask is ‘Is there a correlation with a causation?,’” the younger Stovall said. “I don’t believe there is. I certainly haven’t been able to identify causation.”
The numbers are hard to deny, however. George Kester, a finance professor at Washington & Lee University authored a study regarding the Super Bowl Indicator in 2010. Beginning in 1967, Kester invested $1,000 in the S&P 500. Every time an NFC team won the Super Bowl, Kester would add to his investment in the S&P 500; every time an AFC team won the Super Bowl, he would invest in U.S. T-Bills. Kester included transactions costs and returns from dividends in his calculations. According to Kester’s findings, following a simple buy and hold strategy, a $1,000 investment in 1967 would amount to $42,991 in 2010. However, by investing according to the Super Bowl Indicator, his portfolio would have reached $105,190.
Regardless, most Wall Street insiders view the Super Bowl Indicator as nothing more than a fun statistic. As the younger Stovall told Business Insider, “It shows first off that investors, you know, have an interest and a life outside of Wall Street — they are big sports enthusiasts. At the same time, they are willing to do things that are sort of tongue-in-cheek.”
Photo Credit: ESPN