Congratulations to the Kansas City Chiefs – You Just Tanked the Market…
The Super Bowl has become an American Holiday, with over 100 million viewers tuning into last year’s game. Some watch it for the action on the field or the player storylines leading up to the game, while others watch for the great commercials. Some even hope that the outcome of the big game can forecast things to come in the market for the year, and possibly provide them with an edge to better position their portfolio for the future. So with the Chiefs taking home the title last night, let’s review the Super Bowl Indicator and what that means, or doesn’t, for the markets in 2023.
The Super Bowl Indicator, created in a 1978 New York Times article by sportswriter Leonard Koppettas, is a market predictor along the lines of Punxsutawney Phil predicting the weather and a psychic octopus predicting the winner of Germany’s World Cup games in 2008. This hairbrained investment strategy theorizes that the stock market will end the year with a gain if the team from the National Football Conference (NFC) wins the Super Bowl. But if the Super Bowl winner is from the AFC, stocks should fall. Based on last night’s outcome, and despite Jerome Powell’s best efforts, the indicator has predicted an unavoidable market downturn.
The numbers seem to actually back up this theory. As measured by the performance of the S&P 500, 41 out of 56 times, or a 73% rate, the market has performed in line with the theory that whoever won or lost the Super Bowl determined which way markets would finish for the year. If you want to take it a step further, in years where Super Bowl attendance was above the historical average of fans in the seats at the game, the indicator was 94% accurate (prior to 2021 when limited fans were in attendance due to the Covid-19 pandemic). Last night’s expected crowd was to be slightly above the historical average attendance prior to 2021. So it looks like, thanks to Patrick Mahomes and company, we should be rotating out of stocks and going to cash, right? Not so fast.
The reality is that this so called indicator is less about correlation (the relationship between two independent events, like how ACM CIO Chuck Lieberman, a Giants fan, explains a potential link between the red hot January jobs report and the timing of a future recession), and even less about causation (how one event directly impacts another, like how ACM Director of Financial Planning Jeff Deiss, also a Giants fan, reminded investors of the impact of not staying the course with your portfolio would have on your expected investment experience). It’s really more about coincidence.
A better way to look at this and other wacky coincidences is they’re really just for entertainment. The Super Bowl indicator is no different than trying to predict the likelihood of snow on Christmas or rain on your wedding day based on the color of the 4th of July fireworks.
Unfortunately, there’s no substitute to having a well thought out financial plan and staying disciplined with your investments. Revisiting your plan or strategy should come with changes to your life or situation, and not trying to ease feelings of uncertainty from the markets by making decisions based on what team one on Sunday! One thing I am fairly certain of as a Jets fan, we’ve set the record for consecutive years feeling disappointed in February, and looking forward to next Football season.
Advisors Capital Management, LLC is an investment advisor registered with the United States Securities and Exchange Commission. Registration does not imply any degree of skill or training. All investing carries risk, including the potential for the loss of principal and past performance is no guarantee of future results. This content is for informational purposes only, can change at any time without notice, and is not investment advice or a recommendation to trade any security. Indices are not available for direct investment. We only provide services in jurisdictions where we are registered. Our disclosure brochure (ADV Part 2A) and customer relationship summary (ADV Part 3) are available at https://adviserinfo.sec.gov and upon request.
