The Super Bowl Indicator – Fact or Superstition?

In case you missed it, the Kansas City Chiefs rallied in the second half of Sunday’s game and ended up winning an intense 57^th Super Bowl. So, does this mean that the stock market will end the year in the red? Alternatively, had the Philadelphia Eagles won would we expect a year in the green? If you are asking what the Super Bowl outcome has to do with the stock market, you probably haven’t heard of the Super Bowl Indicator, which is not only one of many irrational indicators of how the stock market will perform for the year, it’s the granddaddy of all off-the-wall indicators. 

The principle of the Super Bowl Indicator is that the stock market will do better when the winning team is from the National Football Conference (NFC) vs. a team that comes from the American Football Conference (AFC). Sunday’s NFC team was played by the Eagles and the AFC team was played by the Chiefs. Any idea of what the success rate is?  Out of the last 56 games, the indicator has been right 41 times, a 73% success rate. So, should we throw in the towel as far as looking at fundamentals, such as corporate earnings and balances sheets, and instead determine whether or not we invest (or stay invested) based on the winner of the Super Bowl? Absolutely not!  Any correlation found between the stock market and the Super Bowl is coincidence and correlation doesn’t equal causation.

As we mentioned in our article, “What Mid-Term Elections Mean for Equity Markets”, the markets are a representation of thousands of companies all over the world, and each company has a purpose to enhance profitability for the shareholders.  The winner of the Super Bowl, a change in political party, or a measure of lipstick sales (yes, there is something called the Lipstick Indicator, which is based on a theory that when lipstick sales rise sharply, times are getting tough) have no relevance to how the stock market will perform.

So, what is the takeaway here? It’s normal for people to look for signals in a world of uncertainty (most recently we’ve experienced uncertainty around the Covid pandemic, rising interest rates, and the war in Ukraine) and it’s normal for a market to look for indicators as to where stocks are heading. However, if you take out emotion, especially anxiety, and consider what the stock market represents – companies which exist to make money for it’s shareholders – it would make sense to continue to stay invested for the long-term and not look for signals or clues to dictate financial decisions.

Just for fun, here is one other indicator: The Hemline Index, which was recognized in the 1920’s, suggests that when the economy is prospering, women’s hemlines would rise and when times were somber, hemlines would fall!

As always, please let your Bluerock Team know if you have any questions. If you can’t find us, just know we may be redesigning our wardrobes in hopes of swaying the markets in our favor!