What’s The Deal With The Super Bowl Indicator?
The year was 1989. January 1989, to be precise.
Ronald Regan was president. “Two Hearts” by Phil Collins topped the charts, and the original Nintendo Entertainment System (NES) was the most sought-after Christmas gift ever. I didn’t get an NES that year — much like the PlayStation 5 I couldn’t find this year.
But I did get a much bigger gift: the Cincinnati Bengals in the Super Bowl.
And this Sunday, Sunday, Sunday … the Bengals return to the biggest game on the planet to play the Los Angeles Rams for the Vince Lombardi Trophy. You know I’ll be glued to my seat.
I know. I know. The Bengals lost that 1989 Super Bowl to the San Francisco 49ers 20-16. Stupid Joe Montana and Jerry Rice.
Actually, they’re not stupid. They were amazing. I’m just still feeling that loss 33 years later.
If you’re a true Great One and never miss an issue, you know that I’m a lifelong Bengals fan. It comes with the territory of living in Northern Kentucky: Wildcats basketball, Cincinnati Reds baseball and Cincinnati Bengals football.
All right, Mr. Sports Fan … can we move this trip down memory lane along a bit?
Right. If you’ve never heard me talk about Bengals football this year, it’s because I didn’t want to jinx them.
It’s a Bengals thing … I also haven’t shaved since they entered the NFL playoffs.
Eeeww. I guess we should call you Mr. Grizzly Adams then?
So, why am I fanboying today? Because my rooting for the Cincinnati Bengals could be bad for your stock market returns.
According to the Super Bowl Indicator — yes, this is a real thing — if a team from the National Football Conference (NFC) wins the Super Bowl, it means that the stock market will rise this year.
Conversely, if a team from the American Football Conference (AFC) wins, it means we’re headed for a bear market.
For the non-football fans out there, the Bengals are an AFC team, and the Los Angeles Rams are an NFC team.
Sounds like an old wives’ tale, right?
Well, it certainly isn’t based on anything scientific, that’s for sure … or is it?
According to Ryan Detrick of LPL Financial, the stock market has finished higher 79% of the time after an NFC team won the Super Bowl. By comparison, the stock market finished higher only 65% of the time an AFC team won.
Now, as much as I want to see your portfolios rally this year … it’s been 33 years since the Bengals went to the Super Bowl … and they’ve never won. Sorry, Great Ones. It is what it is.
But Detrick says not to lose hope if the Bengals win. In fact, AFC wins have been good for stock market bulls in the past 20 years:
He’s even got a nifty little chart:
As Ryan would say: “The data don’t lie.” I know y’all are closet Bengals fans, so you don’t have to worry about your portfolios when they win on Sunday.
Bengals win, 31-28 on a game-winning field goal from Evan “Shooter” McPherson. And as a bonus, Bengals quarterback Joe Burrow will be named Super Bowl MVP. That’s my story, and I’m sticking to it.
And, since this is an investing newsletter, I’m predicting that the stock market will finish higher this year after a second-half bull run. Inflation will level out. The pandemic will finally die down, and investors will rush to buy bargain stocks across the board — but mainly in tech and growth stocks.
Got your own predictions? Let me have it at GreatStuffToday@BanyanHill.com.
REMADE IN AMERICA
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Gabbing With The Gurus
Now, you’ve heard from me and LPL Financial Analyst Ryan Detrick, but y’all want more, right?
Luckily, I’m buddy-buddy with the biggest names here at Banyan Hill. So, I reached out to all your favorite Banyan stock pickers and analysts to get their take on the Super Bowl Indicator.
Here’s what they had to say:
Ted Bauman, Editor of The Bauman Letter, Bauman Daily and Profit Switch:
Sigh … leave it to the guy who spent 25 years in South Africa to be a rugby guy. I hear Ted’s also a cricket fan — the only sport where you can get your wicket sticky.
Well, if you happen to be a rugby fan, there is an indicator for you as well. Apparently, the stock market of the nation that wins the Rugby World Cup enjoys a bull market rally for the next three months or so.
You can read all about it by clicking here if you’re so inclined. Spoiler warning: The U.S. has only won three matches in the Rugby World Cup … ever. That’s three matches, not championships. RIP the Dow on the Rugby World Cup indicator.
That said, if you were looking for some of Ted’s non-rugby-related insights, you can find out more right here.
And now for a take on the Super Bowl Indicator that will truly knock your socks off…
Michael Carr, Editor of One Trade, Peak Velocity Trader & Precision Profits:
I’m going to tell you the truth about the Super Bowl Indicator. It’s not about the stock market, or football. It’s about socialism and capitalism.
The Super Bowl Indicator tells us that if the AFC team wins, we should expect a substandard year in the stock market. On average, since Super Bowl I, we saw a gain of 5% in years when the AFC team compared to 10.5% in years when the NFC team wins.
But the long-term average is hiding something very important. The Super Bowl indicator stopped working in 1995. Prior to that, the stock market generally showed a loss after an AFC win. Since then, returns have been about the same no matter who wins the big game.
There’s a reason this happened. It’s socialism.
NFL teams share about 60% of television revenue along with ticket and merchandise sales. Revenue sharing was created by Pete Rozelle, NFL commissioner from 1960 to 1989. His dream was that “on any given Sunday, any team can beat another.”
To accomplish that, he adopted a small version of Marx’s idea “from each according to his ability; to each according to his needs.” He split revenue ensuring all teams had enough capital to continue operating even if they delivered a lousy product.
But each team keeps some revenue from suites and other amenities. This still made some teams more competitive than others.
That all changed in December 1993, when Fox agreed to pay $1.58 billion over four years to televise NFC games. CBS had owned those rights for almost 40 years and had bid less than $300 million for the package, according to reports at the time.
Cash from Fox and other TV rights deals began flowing during the 1994 season.
This opened the door to big money for all teams and leveled the paying field (not a typo). Since then, money has poured into the NFL, and on any Sunday, any team can win. That includes the last Sunday of the season.
Interestingly, there’s a reason the indicator worked so well before 1995. It’s capitalism.
NFC teams were located in the Rust Belt, the cities that were the nation’s cultural centers when the NFL was founded. The upstart AFL placed teams in cities where new money was building wealth with technology.
Prior to 1995, the NFC teams depended on a booming economy to generate revenue. When they won the Super Bowl, it meant the steel mills and other businesses in middle America were thriving and their fans were filling seats in stadiums, providing funds to sign the best players. An NFC win signified a booming economy and that set the stage for an up year in the stock market.
For this year’s game, don’t look for an indicator on the stock market. Look at it as a lesson on what happens if socialist ideas take hold in America and everyone is equal — not as equal as the 32 billionaires and multimillionaires splitting billions of revenue, but equal in a less affluent way.
Holy cats, Mike. I’ll never look at football the same way again.
And for the rest of the Banyan Hill gurus who didn’t reply … I’m guessing you’ve got NFL and stock market secrets you’re holding close to your chest. There’s only one thing to say to that:
That’s all for this week. Thank you for tuning in for this week’s Great Chat.
Have a great rest of your weekend!
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Editor, Great Stuff