In our role as senselessly devoted fans of the Cincinnati Bengals (me) and the Cleveland Browns (Rocky), our emotional investment in the NFL season usually winds down right at the end of December. However, in our role as hotshot market analysts, we've got a vested interest in the outcome of the Super Bowl each and every year.
You've probably heard of the Super Bowl indicator a time or two before. Basically, this market adage tells us that when a team from the old AFL (now the AFC) wins the big game, stocks will slide that year. Conversely, in the event of a triumph by an original NFL team (now known as the NFC), the forecast is bullish for the rest of the year. As our pals at Investopedia note, this quirky little indicator has been "surprisingly accurate" in the past. As you can see below, an AFC win nets an average S&P 500 Index (SPX) return of -0.01% over the next six months, while an NFC victory usually translates to a 7.77% six-month return for the closely watched index.
Of course, as MarketWatch's Mark Hulbert observed around this time last year, butter production in Bangladesh has been an even more accurate indicator of the market's performance. So, before we dive in with both feet here, let's remember that correlation does not, in any way, imply causation. That being said -- are you ready for some football (-related data)?!?!?
Steelers vs. Packers
By a fortunate turn of events, we don't have to pretend to care about any pesky expansion teams in this year's Super Bowl. Instead, we've got two of the most storied franchises in the league's history: The Green Bay Packers are repping the NFC, while the infuriatingly dominant Pittsburgh Steelers will be flying the AFC flag. As you might infer, Green Bay traces its roots back to the original NFL... but then again, so do the Steelers, with the team having migrated to the AFC only after the 1970 merger.
So, the team's current AFC associations aside, it's typically viewed as an NFC-style bullish victory when Pittsburgh brings home the Lombardi Trophy. Hulbert posits that many analysts allow for this rule-bending simply because the Steel Curtain wins so often (see "infuriatingly dominant," above): "... [W]ithout the exception," he notes, "the Super Bowl indicator's track record is a lot more mediocre."
The Case for Big Moves in IWM and QQQ
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