To the best of my knowledge, none of the many Eagles fans in my college friends group text attempted to overturn a car or climb a light pole in Center City Philadelphia, but they were justifiably giddy last night and this morning. The question is: should investors share, or curb, their enthusiasm?
As someone who roots for a hapless team, based about 90 miles to the northeast, wearing a similar green jersey to the Eagles but with none of the recent winning pedigree (the Jets, ugh), and a daily column to write, I thought it would be an opportune time to see if there might be some market implications from last night’s result To put it mildly, the “Super Bowl Indicator” stinks. There was once a very high spurious correlation between the Super Bowl winner’s conference and the performance of the market over the ensuing 12 months; lately that has been flatly untrue.
The theory stated that if a team originally from the NFL or NFC won, then the market would trade higher; if a team originally from the AFL or AFC won, then it would trade lower. When the correlation was first discovered in 1978, the Super Bowl was relatively new (the first was played in 1967), and markets were choppy during that period. The chart below shows its success:
Super Bowl Indicator, 1967-1978
Winning Team in Text vs, Yearly S&P 500 (line)
Sources: Bloomberg, Interactive Brokers
Since then, however, the “Super Bowl Indicator” has given more than its share of false readings. For investors, there is a beneficial reason – during the 12 years covered by the original theory, we had 7 up years, 4 down years, and one essentially flat year (SPX rose by 0.1% in 1970). Since then, in the ensuing 46 years, the S&P 500 has registered gains in 36 of them. I’m quite sure that investors would prefer a solidly rising market over one that responds to the whims of a football game. And during the last 10 years, 7 of which have resulted in higher markets, 7 of them have seen AFC wins (3 each by the New England Patriots (ugh) and Kansas City Chiefs, and one by the Denver Broncos). More interestingly of the three down years in the past 10, two of them had NFC winners (2018 Los Angeles Rams and 2022 Philadelphia Eagles), and the time that the NFC won during an up year (2021 Tampa Bay Buccaneers), the quarterback was the same as the AFC’s one winner in a down year, the 2015 Patriots, led by Tom Brady (ugh).
Yet there is an important omen in here. In 2018, the prior Eagles victory year, SPX closed -6.24% lower. That year got off to a rip roaring start, but suffered from “Volmageddon” just a few days after the Eagles victory. The market then recovered, but swooned in the fourth quarter of that year. Other Philadelphia victories have occurred during checkered market years. The Philadelphia Phillies last won the World Series in October 2008, which was the height of the Global Financial Crisis. Do we look at that as a positive or negative, since markets did turn around in 2009? The Phillies’ prior victory was similarly tricky, occurring in October 1980, a +25.77%% year for SPX, but just ahead of Paul Volcker’s crackdown on inflation that preceded a -9.73% down year. The Philadelphia Flyers’ two Stanley Cup wins came in 1974, the second year of an awful bear market that saw SPX close -29.72%, and 1975, when SPX recovered 31.55%. That said, when the Philadelphia 76’ers won NBA titles in 1967 and 1983, both years were solidly higher.
There are a few takeaways here:
- First, I am by no means a Philadelphia hater (spare me your comments). I spent wonderful years getting my degrees there – including the 1983 76’er championship led by Julius Erving (Dr. J), my all-time favorite player – and as noted above, have lifelong friends from that area.
- Second, don’t invest based upon what spurious sports indicators may or may not portend.
- Third, and by far the most important, long-term equity investing has been a wonderful thing! With 36 of the last 46 years bringing positive results, that is quite a track record. Of course, past performance is no guarantee of future results, and we can debate whether the current valuations of the market support future gains of the prior magnitude, but generations of investors have done quite well – regardless of whichever team happened to win a big game.
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The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
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Some people are given to conflating “constant conjunction” with causality; they are often going to be deflated. It is possible that one’s belief in the causal connection between two different events might be influenced by that belief, e.g., thinking it will be an up year can convince a segment of the investing public to put more money into stocks, which influences the market to go up. But not infrequently, once a theme like this catches on with the general public, it comes to an end. Btw, as a Philly resident of nearly eighty years, I’ve had more than my share of sports disappointments, so I would appreciate if you would refrain from pissing on my parade for its few short moments.
No causal relationship. Simply conjecture based on coincidence. The Eagles destroyed the Chiefs, simply because they’re the better team. It won’t affect my portfolio, but definitely put a big smile on my face. Go Birds!
So far, common sense supports this observation about the US Stock Market, the advance is permanent and the declines are temporary. Regardless of what sport or sports team wins whatever championship game, match, or competition, the advance of the US Market (use your favorite index…S&P or DJIA or ???) has been permanent, and the declines have been temporary. When you think long term, a lot of the noise that scares investors and fools many professionals, becomes background noise. You still hear the distracting “noise” as you look for long term trends, but you do not let it scare you into or out of the market. Your perspective is in focus and balanced. FOMO is one of the biggest emotional addictions to which investors, amateurs and professionals, can become addicted. Too much information is already a huge problem that can easily bury the important information. Maybe artificial intelligence can help sort through the overwhelming avalanche of “information obesity” to get to the truly impactful and useful information. It is too early to speak to the long term outcome of today’s decisions made with the support of LLM (Large Language Model). How ironic that that at least in this case, it appears “Artificial Information” will be used to identify the “truth” (the information that is truly informative, impactful, and forward thinking) for forming a current market outlook
Sounds like an exciting night for Eagles fans! As for investors, enthusiasm is great, but a little caution might be wise—let’s see how things play out!