What Does the Super Bowl Theory Portend?

February 3, 2006 (PLANSPONSOR.com) - Adherents of the so-called Super Bowl Theory are no doubt grinning ear-to-ear these days, regardless of Sunday's winner.

For the “uninitiated,” the theory says that a win by a team from the old National Football League is a precursor to rising stock values for the year (at least as measured by the S&P 500), but if a team from the old American Football League prevails, stocks will fall.

However, as luck would have it, no matter who wins Super Bowl XL between the Pittsburgh Steelers and Seattle Seahawks this weekend, the Super Bowl Theory calls for a 2006 stock market rally.   Turns out that while the Pittsburgh Steelers currently represent the American Football Conference (AFC), they were originally an NFL team.   The Seattle Seahawks, of course, represent the National Football Conference (NFC).

Could such an odd indicator really work?   Believe it or not, since the first Super Bowl was played in 1967, the so-called Super Bowl indicator has correctly forecast the S&P 500’s direction 3 out of 4 times.   Unfortunately for those looking for a clear winning strategy, the Super Bowl indicator has had only one clean win in the past eight big games.

History’s Lessons?

Consider that the AFC New England Patriots’ 24-21 win over the NFC Philadelphia Eagles in last year’s game should have been a bad portent for the markets (see If Eagles Fly High, Will Stocks Soar? ).   However, in 2005 the S&P 500 climbed 2.55%.  

Of course, the 2002 win by the AFL-born New England Patriots accurately foretold the continuation of the bear market into a third year (at the time, the first accurate result in five years). But those same Patriots prevailed against the Carolina Panthers in 2004 – and a fall rally helped push the S&P 500 to a near 9% gain that year, sacking the indicator for another loss (see  Panther Win, Bulls Run? ).   Consider also that, despite victories by the old AFL Denver Broncos in 1998 and 1999, the S&P 500 continued its winning ways, while victories by the NFL legacy St. Louis (by way of Los Angeles) Rams and the Baltimore (by way of NFL legacy Cleveland Browns) Ravens did nothing to dispel the bear markets of 2000 and 2001.

In sum, the Super Bowl Theory has a good predicative track record – just not a good predicative track record lately.   Still, whoever wins – or loses – it seems fair to say that Super Bowl Theory proponents will be able to claim victory!

  Other exceptions included: 1970, when AFC Kansas City won, and the S&P index gained 0.1%; 1984, when AFC Los Angeles Raiders won, and the S&P rose 1.4%; 1990, when NFC San Francisco prevailed, and the S&P lost 6.56%; and 1994, when NFC Dallas triumphed, but the S&P index fell 1.53%.