The Super Bowl Indicator Says BUY!
The beginning of a new year always brings more forecasts and predictions than any individual could hope to process, including the famous Super Bowl Indicator. For investors, quarterly corporate earnings reports are closely scrutinized for guidance through the new calendar year. Annual budgets are established. GDP estimates are made. On January 23, the International Monetary Fund released its World Economic Outlook Update, which included a massive list of economic growth projections for 2013 and 2014.
Those of us who can’t get enough forecasts dig for signals other than the run of the mill opinions found in the mainstream media.
These can range from oddball weather indicators like Punxsutawney Phil, the groundhog who lives in Pennsylvania and forecasts how long winter will last based on whether or not he sees his shadow. Stock market investors usually track more reliable trends for hints as to what the New Year will bring. Many investors follow the “January Barometer,” as developed by the Stock Trader’s Almanac, to extrapolate from the market’s performance in January, a predictive model for what the remaining eleven months will bring. For the past 75 years the success ratio of the January Barometer has been 70.7 percent.
Another oddball seasonal indicator with a highly reliable record is the widely-popular Super Bowl Indicator which tells us whether the stock market will be bullish or bearish for the year. Strangely enough, the Super Bowl Indicator has a success rate of approximately 80 percent, despite the fact that its basis has nothing to do with stock market statistics, economics or business. Nevertheless, this indicator enjoys better results than those obtained by most hedge funds or mutual fund managers.
The Super Bowl Indicator is based on the premise that if the winning Super Bowl team comes from the original National Football League (back when there used to be a separate American Football League, from 1960 -1969), the S&P 500 (NYSEARCA:SPY) will be bullish for the rest of the year. The AFL was founded by a number of owners who had been denied NFL expansion franchises. In 1970, the ten AFL franchises were merged into the NFL, where they became known as the “American Football Conference”.
This year, believers in the Super Bowl Indicator are convinced that a bullish 2013 is a fait accompli because both Super Bowl teams were (arguably) in the National Football League during the 1960s. Although the Baltimore Ravens did not originate as a Baltimore team until 1996, they were formerly known as the Cleveland Browns (an NFL team) until owner Art Modell relocated the team to Baltimore. Once the team was relocated, the NFL treated it as an expansion team and shifted it to the American Conference. Even Baltimore’s old team, the Colts, hailed from the National Football League of the 1960s before the team was relocated to Indianapolis, so either way, the pedigree of the Baltimore team is the National Football League. The San Francisco 49ers, of course, are a long established NFC franchise.
Regardless of the Super Bowl Indictor’s success, believers should not feel too comfortable with their presumption of a guaranteed bullish market this year just based on the origins of both the San Francisco 49ers and the Baltimore Ravens. The last time that both Super Bowl teams originated from the 1960s NFL was in 2001, when the Ravens played the New York Giants. The Dow Jones Industrial Average (NYSEARCA:DIA) fell 7.1 percent that year and the S&P 500 (NYSEARCA:SPY) sank 13.04 percent, marking one of the years that this interesting indicator was a bust.
Bottom Line: Nevertheless, probability points to 2013 being a bullish year based upon the Super Bowl Indicator and its track record. No matter what happens to the market this year, one thing is certain; Super Bowl Sunday has become a great American holiday and this Sunday will be no exception no matter which team wins.