The Super Bowl Stock Market Indicator postulates that when a team from the old National Football League (before the 1970 AFL-NFL merger) or a team from the National Football Conference wins the Super Bowl, large cap U.S. stocks will advance for that calendar year.
Conversely, a victory by a team from the old American Football League (a group that includes the Broncos and Patriots) is supposed to bring out the bears.
The silly indicator has racked up a remarkable 35-10 (78% accuracy) record since the Green Bay Packers beat the Kansas City Chiefs in first Super Bowl on January 15, 1967.
Washington and Lee University Professor George Kester studied how investing by the Super Bowl indicator would have played out from 1967-2008, with $1,000 invested alternatively in the S&P 500 or Treasury bills, depending upon whether an NFC or old NFL team won the Super Bowl. Kester found that the dollar values of the portfolios at the end of 2008 would have been $43,000 for buy-and-hold and $105,000 for the Super Bowl timing strategy.
The thing about investing by a system is you can�t pick and choose which rules to follow, but this indicator does have its share of whiffs. Back in 2008, the old-NFL New York Giants couldn�t keep the S&P 500 from cratering 37%, and the St. Louis Rams� victory in 2000 preceded a 9.1% drop as the tech bubble burst.
Perhaps most significant for this year�s playoff picture are two misfires in 1998 and 1999 when John Elway and the Denver Broncos won back-to-back Super Bowl victories and the S&P 500 surged 33.4% and 28.6%, respectively. Perhaps the Super Bowl Stock indicator needs an important Denver corollary that when the Broncos win the big game, it�s party time for the bulls.
By this logic, stock market investors should be Tim Tebow fans. Tebow and the Broncos have a few things in common with stocks. They both have plenty of doubters despite a streak of admirable performance. Market sentiment remains bearish despite big gains, especially loathed sectors like the financial stocks. As a group, the XLF is up 20% since early October, with Morgan Stanley up 30%; Citigroup and JPMorgan Chase have both jumped 25% in the past three months.
Home builder stocks, measured by the XHB ETF, are up 50% since October 3, and Toll Brothers has clocked a 70% gain, Lennar is up 65%. And Tebow�s not a drop-back, pocket passer, right, Merril Hoge? Time to bet the underdog.
The Broncos go into Foxboro, Mass., as 13.5-point underdogs to the Patriots, even though they were underdogs last weekend to Big Ben and the Pittsburgh Steelers.
Don�t be too quick to condemn New England for standing between you and stock market gains. Back in 2002, when Tom Brady and Bill Belichick beat the Rams for the Patriots� first Super Bowl win, the SPDR S&P 500 tanked 22%. Patriot wins in 2004 and 2005 were in more salubrious years for stocks with the SPY up 11% and 5%, respectively. So it comes down to who you want to see win�Tebow or Brady, Fox or Belichick?
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