Should investors be concerned about the Super Bowl Indicator?
(WTNH) - The "Super Bowl Indicator" claims that a win by a team from the AFC signals a bear market, while a win by an NFC team (as well as teams from the original NFL before the merger of the AFL and NFL in 1968) indicates a bull market. Financial Consultant John Caserta answers our questions about the theory.
Where did this theory come from?
* This theory was first introduced in 1978 by Leonard Koppett, a sportswriter for the New York Time.
How accurate is the Super Bowl Indicator?
* According to sources, the Super Bowl Indicator was at one point more than 90% accurate in predicting the performance of the S&P 500 in the following year. But there is a major dispute in the data - the theory includes the Pittsburgh Steelers (who have won the most Super Bowls) as an NFC team (where they started) even though the won as an AFC team.
* And in the past 10 years, the Super Bowl Indicator has been about as accurate as a coin-toss. Most recently, the Broncos and Patriots didn’t predict a down market, and the Eagles win didn’t signal a bull market.
* This theory is more fun than it is serious investment advice or theory. It’s a football game and should not be driving decisions in your portfolio.
So what should investors do?
* The Super Bowl Indicator raises a good point – correlation is not causation. A football game will not determine the performance of the market. And using such info to predict market performance – and worse, make investment decisions – can be problematic.
* It’s important to consider your goals and your appetite for risk – that will help determine how to position your portfolio in a manner that is appropriate for you.