Published January 30, 2013
There is no shortage of indicators that traders and investors watch and monitor in an attempt to forecast the direction of the stock market.
One of the most unusual, and surprisingly most accurate, barometers out there is the Super Bowl indicator, created by Sam Stovall, a prominent Wall Street strategist.
The indicator has two simple rules: if the wining team comes from the original National Football League, the stock market will have a bullish year. If the team from the AFC wins, it will be a bearish year for stocks.
While it seems like an odd superstition, it does have some predictive power: Over the past 43 years, the indicator has had an 80% accuracy rate, a track record Stovall is quite proud of. “I’d say an 80% accuracy rate is pretty good; there are plenty of market gurus and forecasters out there that would love to boast an 80% accuracy rate.”
If you’re a true believer in the Super Bowl indicator then you’re already celebrating a market victory, even before the game is played. That’s because this year no matter who wins it will be bullish for the stock market.
It turns out both teams in this year’s big game were originally members of the National Football League. Even though the Baltimore Ravens are currently in the AFC, the team started as the Cleveland Browns, one of the original members of the NFL. The Cleveland Browns were relocated to Baltimore by owner Art Modell in 1996. Once they were moved they were essentially treated as an expansion team and were shifted to the American Conference.
Their opponent, the San Francisco 49ers, is of course a long established NFC franchise. So matter who walks way with the Lombardi trophy this weekend, investors should have something to cheer about.
But before you head to your portfolio manager and start shifting all your money into equities, remember that correlation doesn’t imply causation. In 2008, despite a Super Bowl win by the New York Giant, an NFC team, the S&P fell by more than 37%.