Tickers in this Article: SPY
Written by Rebecca Lipman
There are a lot of colorful financial predictors out there, and it is with a raised eyebrow that I present to you lovely readers the "Super Bowl Indicator."
That's right, it's a financial prediction tool that estimates market's yearly outcome depending on whether the winning team is from the AFC division or the NFC division. If an AFC team wins, the indicator foretells a decline in the coming year. If an NFC team wins, the market should be up for the year.
And here's the best part: The indicator actually boasts an 80% accuracy rate. "In the 24 Super Bowls that have gone to the NFC, the benchmark equity index has ended the remainder of the year higher 79% of the time with averaged returns of +10.2%, while the AFC's 21 victories have been followed by gains into year-end 62% of the time, with an average return of only +3.1%."
But here's the sad part: Historically, the Giants (NFC) have been an exception to the rule: "On the three occasions when the Giants won the big game, the S&P 500 was lower by an average of -6.6% from the day of the Super Bowl through year-end."
As for the Patriots (AFC): "When looking at the performance following New England's only three Super Bowl victories, the average performance through year-end (-3.4%) isn't much better."
So, according to the index, this upcoming game is a lose-lose scenario for the market. Which is a shame, since the Standard & Poor 500 index did such a nice job rallying in January, even to the point of a "golden cross."
So, choose your team wisely. Next Sunday's game may have a more long-term effect, mainly on your 401K, than you anticipate.
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Remember, correlation does not imply causation.
If you think this theory holds water, take a look at the chart below, which tracks the changes in value of the S&P 500 index over the past two years. Do you think it will drop after this Sunday?