The winner of Sunday’s Super Bowl will determine what kind of year the stock market will have. Or at least that’s what history suggests.
The “Super Bowl indicator,” a theory first posited by sportswriter Leonard Koppett in the 1970s, holds that whenever the NFC team wins the big game, the S&P 500 rises for the year. If the team representing the AFC wins, the market goes down. So investors rooting for a strong year should also be rooting for the Atlanta Falcons on Sunday. Those looking to short the market should be backing the New England Patriots, who, ominously enough, are currently 3-point favorites.
Over the years, the indicator has been eerily accurate in predicting the market’s fortunes. Based on the scores of the 50 Super Bowls played to date, the theory has been correct 40 times, making for an 80% success rate.
Adding another layer for prognosticators is the Chinese lunar calendar, which sequentially names each year after one of 12 animals. The Chinese just celebrated the Lunar New Year on January 28th, moving from the year of the Monkey to the year of the Rooster. Since 1945, the rooster hasn’t been particularly great for the markets. The S&P 500 has risen an average of only 4.1% during the year of the Rooster, which is the third-lowest average for all years. By contrast, the year of the Ram, which just passed two years ago, averaged a robust 14.8% increase. It should be noted that all of the 12 years associated with animals averaged gains in the market, even though there certainly have been many years where stocks have taken hard hits.
While it may be fun to look at these sorts of figures, it’s important to remember that these trends are mere coincidences. Though there is correlation in the data, it’s ridiculous to claim that there’s causation. Just look at glaring exceptions like 2008, which saw the NFC-representing New York Giants win the Super Bowl. Though the Super Bowl indicator should have foretold that Wall Street was in for a strong year, the market had one of the worst crashes since the Great Depression, with the S&P 500 freefalling 38.5%. Or, for that matter, look at last year, when the AFC’s Denver Broncos beat the Carolina Panthers in the Super Bowl, and investors went on to defy the mighty indicator by sending the market up 12%.
What’s more important, obviously, is to consider traditional market indicators. A close look at the S&P 500’s price-to-earnings ratio reveals it is riding higher than average. It currently sits at 25.53, which considerably overtops its historic average of 15.64, according to data compiled by economist Robert Shiller. Indicators such as the consumer confidence index or jobless claims matter, too, especially now that President Donald Trump seems to create more uncertainty by the day. If Trump’s ongoing moves undermine confidence in him, it will be harder for him to push through his infrastructure plan and ease regulations, which are two factors that are thought to be spurring Wall Street’s rally since his election.
If investors delve into the numbers and consider the context of what is going on throughout the nation, it wouldn’t be unreasonable to think the market is due for a comedown–whether or not the Patriots beat the Falcons.