What is the Accuracy of This Stock Market Indicator?
Last Sunday was, of course, “Super Bowl Sunday,” that uniquely American event that has taken on legendary status since its inception some 45 years ago. Dubbed the “World Championship” in a sport that is played only in America, the hype is equally magnified as the week builds up towards the climactic game on Sunday afternoon which is a combination of Hollywood entertainment, great excuse for a party and sometimes even a good football game.
The Caesars in ancient Rome used to use “panem et circenses,” bread and circuses, as a tool for appeasing the masses and maintaining political power, and in today’s world, an event that captured 100 million worldwide viewers and was the most watched program in television history, certainly qualifies as the ultimate in bread and circus.
However, for investors there’s a more serious side to this outsized pageantry and that is that the “Super Bowl Indicator” is a surprisingly accurate stock market forecaster.
The indicator is based on the premise that if the Super Bowl Champion came from the old AFL, now known as the AFC, that the year will bring a down trend in the stock market while a winner from the old NFL, now the NFC, will lead to a bull market.
While the accuracy of this indicator is widely debated and even debunked, the results are clear; the Super Bowl indicator is accurate about 80% of the time, performance which is better than most hedge funds and mutual fund managers could ever dream of or hope to achieve.
This year’s game featured two particularly storied teams, the Green Bay Packers which trace their roots to 1921 and the Indian Packing Company, and the Pittsburgh Steelers who started life as the Pittsburg Pirates.
Both have had long runs as leaders in professional football. Who could forget Terry Bradshaw winning four Super Bowl titles in the 1970s which happened to coincide with a difficult era for the stock market, while the Packers’ last time on the victory stand at the Super Bowl was in 1996, just as the bull market of the late 1990s-2000s was getting underway.
With an accuracy rate of approximately 80% of the time going back to Super Bowl I, this year was a lock for an up year in the market based on this indicator since both teams were from the old NFL.
Of course it was a great game and the ultimate in panem et circenses. For at least a few hours we could forget about Egypt and QE2, the possibility of runaway inflation or maybe deflation, the national debt and maybe our own credit card debt, and just hang out with our friends, eat chips and salsa and enjoy a great football game.
Best of all, with the Packers taking home the trophy, it could be good news for us as investors, because the Super Bowl Indicator says “buy.”
Disclosure: No positions in ETFs or stocks discussed in this article.
John Nyaradi is the author of Super Sectors: How To Outsmart the Markets Using Sector Rotation and ETFs.
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