by: Richard A. Anderson
The National Football League (NFL) season reached its conclusion yesterday when the New England Patriots defeated the Los Angeles Rams 13-3 at Mercedes-Benz Stadium in Atlanta, Georgia to win the Super Bowl. While New England Patriots Fans are busy celebrating their sixth Super Bowl win in the past eighteen years and Los Angeles Rams fans are licking their wounds, some investors are looking to the final score to get a sense of how the stock market is likely to perform for the rest of the year.
The Super Bowl Indicator suggests that the S&P 500 Index performance can be tied to the Super Bowl winning team’s conference. The NFL teams are divided into two separate conferences: National Football Conference (NFC) and American Football Conference (AFC). The best team from the NFC plays the best team from the AFC to determine the winner of the Super Bowl.
History tells us that when the Super Bowl winner is an NFC team it is better for the stock market. Dating back to the first Super Bowl in 1967, an NFC team has won 27 times and an AFC team has won 25 times.
In the 27 years when an NFC team has won the Super Bowl, the S&P 500 has had an average yearly return of 13.85%. 23 times, or 85% of the time, the S&P 500 has posted positive returns for that calendar year.
In the 25 years when an AFC team has won the Super Bowl, the S&P 500 has had an average yearly return of 8.86%. 18 times, or 72% of the time, the S&P 500 has posted positive returns for that calendar year.
Taking an even smaller sample size, we can look at the performance of the S&P 500 when the New England Patriots Tom Brady and head coach Bill Belichick win or lose the Super Bowl. Prior to yesterday’s game, Brady and Belichick have led the Patriots to eight Super Bowl, winning five times.
In the five years when the Patriots won the Super Bowl, the S&P 500 has had an average yearly return of 3.38%. Four out of five years the S&P 500 has posted positive returns for that calendar year.
In the three years when the Patriots lost the Super Bowl, the S&P 500 has had an average yearly return of -8.46%. Two out of three years the S&P 500 has posted negative returns for that calendar year.
While the outcome of the Super Bowl has no economic or behavioral rational for explaining stock market returns, it’s interesting to look at its “predictive power.” Of course this indicator has no connection to future stock market returns and should not be relevant to investors. However, it is not uncommon to see interesting facts like this floating around the internet or media outlets.
This is as good a time as any to remind you that interesting does not always mean actionable. Look no further than last year, when the Philadelphia Eagles of the NFC won the Super Bowl and the S&P 500 declined 4.