Market Beat: The Super Bowl Indicator
The Super Bowl Indicator is one of those old stock market sayings that you may hear about in the financial press. It was first introduced in 1978 by Leonard Koppett, an New York Times sportswriter.
The way it’s supposed to work is pretty simple. If the NFC team wins the Super Bowl game that is a bullish indicator for the stock market and if the AFC team wins that is bearish. If you want to see the bull run that we’ve had for the last few years continue, that means that you should be rooting for the San Francisco 49ers to win.
At one time, the Super Bowl Indicator had about a 90% accuracy rate. In the last 10 years or so, though it has been roughly 50/50, no better than a coin toss. Correlation does not imply causation. Just because events seem to behave in a similar fashion does not mean that there is a reason for it, it could be coincidence.
The global economy is what drives the stock market and we have been in a long expansion. What’s been affecting the market recently has been the news of the coronavirus, also known as 2019-nCoV in China.
These types of illnesses can have a serious impact on the global economy, so we’ll have to wait and see how this plays out. Theoretically, in the worst case if the virus was resistant to modern vaccines and easy to catch the death toll could be quite high, in the millions and the economic impact would be in the billions.
One estimate for the Ebola virus breakout in 2013 was that it cost the global economy about $50 billion. According to an article in MarketWatch, there is a report that states that a pandemic could cause an average annual economic loss of 0.7% of global GDP, gross domestic product, which would be about $570 billion dollars.
Over a hundred years ago, the influenza out break known as the Spanish flu in 1918, killed an estimated 20- to 50-million people worldwide.
Hopefully, the coronavirus will be contained effectively. As far as the Super Bowl is concerned, I wouldn’t worry about the outcome of a championship football game having an effect on stock market returns. I recommend sitting back, enjoying the game and rooting for your favorite team. I think that it’s going to be a good game this year.
Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information is at his blog at http://iwcasset.com or 775-657-8065. The mention of securities should not be considered an offer to sell or solicitation to buy investments mentioned. Consult your investment professional to understand the risks and/or how the purchase or sale of these investments may be implemented to meet your investment goals. Past performance is no guarantee of future results.