Why Stop at the Super Bowl?

Between market volatility and the ongoing tensions in Ukraine, investors haven’t had much fun lately—so thank goodness for yesterday’s Super Bowl introducing a bit of levity. Not just for the commercials, nor the game itself and the halftime entertainment—but for the ever-entertaining Super Bowl Indicator. We aren’t convinced anyone actually follows it, but it gets some tongue-in-cheek coverage every year. This year was no exception, and we would like to tip our hat to The Wall Street Journal’s Spencer Jakab for doing an especially delightful job showing the absurdity of trying to read too much into these quirky indicators.

The Super Bowl Indicator, for those not familiar, holds that when a team from the National Football Conference (NFC) wins, stocks will do well for the rest of the year—but if an American Football Conference (AFC) team wins, look out below.^[i] The NFC Champion Los Angeles Rams beat the AFC Champion Cincinnati Bengals yesterday, which—according to the indicator—bodes well. Or does it? As Jakab noted: The Super Bowl Indicator’s “predictive power has more holes recently than [the Bengals’] offensive line. After all, the then-St. Louis Rams won in 2000, right before technology stocks cratered, and the NFC’s New York Giants won to kick off an even rockier 2008. And if you ‘burrow’ into the numbers, other Super Bowl signals are less-encouraging. According to Cetera Investment Management, when one of the winning team’s primary colors is orange, like the Bengals, then the S&P 500’s total return for the rest of the year has been a whopping 22.6%. That slips to barely one-third as much when the primary color is blue, like the Rams.”^[ii]

All of these “indicators” are for entertainment purposes only. They are coincidences—random happenstance with no causation. Consider them the investing equivalent of the correlation between per capita cheese consumption and the number of people who died by becoming tangled in their bedsheets, as documented at Tyler Vigen’s Spurious Correlations website.^[iii] Anyone with Excel, a dataset of annual S&P 500 returns and a yen for random trivia can make similar observations.

For instance, did you know you should be rooting for Lance Stroll or Nicholas Latifi to win the Formula One Drivers’ Championship this season? After all, S&P 500 price returns are best the year after a Canadian wins. And they are worst after a Finn wins, so you should be thankful Kimi Räikkönen retired last year—and hope Valtteri Bottas doesn’t outperform this year. Alas, we can’t use our magic Formula One Indicator to predict this year’s returns, as a Dutchman won for the first time last year, but we do have some good news courtesy of our Australian Open Indicator! You see, S&P 500 returns are best the year a Spaniard wins the Men’s Singles Championship, and Rafael Nadal was victorious last month. Adding some extra mojo? Baseball! Since 1950, returns are best the year after the World Series goes six games, as it did last year.

We could go on, but you get the point—these are all just interesting observations with no actual power. These things last until they don’t. When sportswriter Leonard Koppett “discovered” the Super Bowl Indicator in 1978, it had a perfect record—hence the attention heaped on it. But it fizzled afterward (maybe it got priced in!) and has been wrong more often than not over the past decade. In his 1987 coffee table book, The Wall Street Waltz, Fisher Investments’ Founder and Executive Chairman Ken Fisher told the story of those who found peak sunspot activity preceded stock market routs in 1836 – 1843, 1872 – 1878 and 1929 – 1932 as well as sharp drops in 1907, 1937 and 1969. Combine that correlation with the observation that sunspots tend to follow 11-year cycles, and a cottage industry in sunspot-based market forecasting was born. Since then, we have had two bear markets coincide with peak sunspot activity (1990 and 2000 – 2002) and two that didn’t (2007 – 2009 and 2020).^[iv]

Spurious market indicators are great fun. They have a long, long history—like the old practice of noting the hemlines at Fashion Week to see if a recession is in the offing. Or the more niche variety, like the Maria Bartiromo Market Hairdex.^[v] But, friends, fun is all it is. Unless you can prove fundamental causation, then a silly coincidence is just a silly coincidence—good for trivia night, not portfolio decisions.