The New England Patriots won the National Football League championship game on Sunday in what was definitely the lowest scoring Super Bowl in history and probably the most boring Super Bowl in history.
The New England Patriots set the record for most Super Bowl appearances, with 11, the most appearances with the same quarterback, nine with Tom Brady, and tied for the most Super Bowl wins at six with Pittsburgh.
But what does this mean for the stock market?
On the surface, not much. The Monday after Super Bowl LIII, the S&P 500 Index rose 0.6% and had a 0.4% follow through the next day. The Dow Jones Industrial Average gained 0.7% on Monday, Feb. 4 and added another 0.7% on Tuesday.
But trouble may be in store this year.
The Super Bowl Indicator, one of the most consistent stock market predictors, says this year will not end well.
The indicator was “discovered” by sportswriter Leonard Koppett in the 1970s. Credit for keeping it going is given to Wall Street analyst Robert H. Stovall, its longtime guardian.
“There is no intellectual backing for this sort of thing,” Mr. Stovall told the Wall Street Journal about the Predictor in 2016, “except that it works.”
The Super Bowl predictor says that if the winning team is from the National Football Conference (NFC), or was in the NFL before the American Football League merged with it in 1970, then stocks will have a bull market that year. If a team from the American Football Conference (AFC) wins, then it will be a bear market.
The Patriots are from the AFC. So, the indicator predicts a bear market this year.
This is not a foreign idea to investors who have experienced a stock market roller coaster the past four months. The S&P 500 hit an all-time high of 2930.75 on September 20, 2018. Over the next 14 weeks, the benchmark plummeted 580 points, or 19.8%, to 2351.10. Its decline terminated with the Christmas Eve plunge of 2.7%, the biggest pre-Christmas drop in history. The Dow sank 2.9%, making it the worst Christmas Eve in the blue-chip benchmark’s 122-year history.
The S&P 500’s 19.8% decline just managed to miss the 20% drop necessary to be called a bear market.
Starting with a huge rally the day after Christmas, the S&P 500 has managed to recover 387 points, or 16.4%, to close at 2737.7 on Tuesday. Despite this huge rally, investors are still skittish. Let’s not forget, the S&P ended 2018 down 4.4%.
Which brings us back to the Super Bowl Indicator.
As of last year, the Indicator had predicted the direction of the S&P 500 40 out of 52 times, for 77% accuracy. Since the fiscal crisis, the market rose in years 2010-2012, when the NFC won. The market also rose in 2013 when the Baltimore Ravens, an AFC team, won, bucking the indicator.
In 2014, the NFC won and the market went up. In 2015, the Patriots posted one of their record six wins. That year the S&P 500 fell 0.73% before dividends and the Dow fell 2.2%.
However in 2016 and 2017, AFC teams won the Super Bowl and the stock market rose, going against the indicator. Last year, the Philadelphia Eagles, an NFC team won. This should have been a bullish sign, but instead the market ended the year down.
So, where does that leave us?
The Super Bowl Indicator says when an AFC team wins the market should fall. But for the last three years, the stock market has bucked the indicator, going in the opposite direction of the prediction.
This brings us back to Mr. Stovall: “There is no intellectual backing for this sort of thing.” So, you’re really on your own now kids.
The stock market could continue its three-year streak of ignoring the Super Bowl indicator, which would mean a bull market. Or considering the low scoring game, the fact most people didn’t want the Patriots to win and almost everyone found the game boring, this could be the year the stock market and the football stars realign, which would mean a bear market.