The most anticipated game of the year is almost here. On Sunday, the Denver Broncos and the Seattle Seahawks will go head to head in Super Bowl XLVIII. While fans have all kinds of different reasons for cheering on their teams, which one will Mr. Market be rooting for in the big game?
There are many peculiar stock market indicators that receive attention throughout the year. It’s not wise for investors to place much faith in them, but they are often interesting to discuss. The Super Bowl Indicator is one such metric, and it is based on the belief that a win for a team from the National Football Conference predicts a strong performance for the stock market in the coming year. Correlation certainly doesn’t imply causation, but there is a clear trend when the NFC wins the Super Bowl.
In the 47 Super Bowls since 1967, the S&P 500 has performed better when the NFC wins, according to research firm Bespoke Investment Group. When a team from the NFC wins, the S&P 500 has gained an average of 10.4 percent for the remainder of the year, more than double the 4.3 percent return when a team from the American Football Conference wins the Super Bowl. Furthermore, the stock market finishes in positive territory for the year 80 percent of the time with a NFC win compared to only 63.6 percent with an AFC win.
However, those placing bets on the big game may want to make an exception and cheer for the Broncos this year. The Broncos have already played in six Super Bowls. Following the two Super Bowls the team won (1998 and 1999), the S&P 500 jumped an average of 21.6 percent, the highest return among teams with at least two Super Bowl wins. On the other hand, the S&P 500 only gained an average of 2 percent for the year when the Broncos lost the Super Bowl.
Bespoke notes: “This Sunday’s game is the second time the Seahawks have made it to the Super Bowl. The first time they made it to the championship game they lost to the Pittsburgh Steelers in Super Bowl XV (2006). Following that loss, the S&P 500 saw a gain of 12.2 percent through year end. With the S&P 500 doing better when Denver wins than when Denver loses, and rising more than 10 percent in the one year where the Seahawks made it and lost, this year the bulls are rooting for the AFC.”
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