Should investors in the stock market root against Peyton Manning in the Super Bowl?
It’s completely random and, in the words of one analyst, “totally irrelevant,” yet the Super Bowl indicator has been right about the direction of the market more often than not.
The Super Bowl predictor holds that the Standard & Poor’s 500 will rise for the year if an NFC team (or an AFC team that started in the NFC) wins the big game. Shares prices would decline if an AFC team prevails.
Thus, bulls theoretically should root for the Seattle Seahawks over the feel-good story of Manning and the Denver Broncos.
The indicator is “totally irrelevant and irrational,” in the words of Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. But oddly, the theory has notched “a much better track record than most stock pickers,” he noted.
The indicator has been correct 37 of the last 47 years, or nearly 79%. Even eliminating the two years in which the S&P was down in price but up when dividends were factored in, the theory still has worked nearly three-quarters of the time.
Thus far, the S&P is down 0.52% this year.
A slightly better indicator may be the January barometer, which posits that the market’s showing in the first month of the year foreshadows its performance the rest of the year.
It’s also arbitrary.
“What makes the saying irrational is that January is only one of 12 months, and that there is no rational reason to draw such a conclusion,” Silverblatt said.
However, it’s been on the mark 62 of the last 85 years, or 73% of the time.
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