A(nother) Sure Thing?

Generally speaking, there’s no such thing as a sure thing – certainly when it comes to investing, and certainly not two years running.

Still, if the results of the Super Bowl exert any influence on the markets – as proponents of the so-called Super Bowl Theory claim – then 2010 should – again – be a good year for investors.      

For the “uninitiated,” the theory (invented/popularized by the late New York Times sportswriter Leonard Koppett) says that a win by a team from the old National Football League is a precursor to rising stock values for the year (at least as measured by the S&P 500), but if a team from the old American Football League (AFL) prevails, stocks will fall in the coming year.        

NFL Legacy      

And, while the Indianapolis Colts will represent the American Football Conference in this year’s contest with the National Football Conference’s New Orleans Saints, both have NFL roots, the Saints since their franchise was awarded on November 1, 1966 (on All Saints Day, no less), while the Colts’ NFL origins date back to their origins in Baltimore.  And that, according to the Super Bowl Theory, means that it should be a good year for stocks – no matter which team wins.

That was certainly the case in 2009 (seeA Sure Thing?) when both Super Bowl teams – the Arizona Cardinals and the Pittsburgh Steelers – had NFL roots (the Arizona Cardinals by way of one time being the St. Louis Cardinals), and in 2007 when the S&P 500 rose 3.53% as these same AFC champion Indianapolis Colts beat the NFC Chicago Bears 29-17 (see If the Bears Win, Will the Bulls Run?).  That also turned out to be the case in 2006 when the Pittsburgh Steelers defeated the Seattle Seahawks in another battle of two legacy NFL clubs.  That turned out to be a good year for equities, with the S&P 500 closing up more than 13%.  

Except When It Doesn’t…

Of course, as even loyal proponents will admit, this theory used to work a lot better than it has in recent years.  The most obvious (and recent) proof of that was Super Bowl XLII, where the New York Giants pulled off a remarkable victory – but the S&P 500 still shed…well, we don’t really need to relive that here (particularly for Patriots fans).

In fact, in addition to those results, the Super Bowl Theory came up short every year between 1998 and 2001.  Moreover, for those looking for a clear winning strategy, the Super Bowl indicator has had only one “clean” win in the past decade.  On the one hand, the Super Bowl Theory has been right about 80% of the time.  

Recent History

Consider the AFC New England Patriots' 24-21 win over the NFC Philadelphia Eagles in 2005.  According to the Super Bowl Theory, the markets should have been down for the year.  However, in 2005 the S&P 500 climbed 2.55%.

Of course, the 2002 win by those same New England Patriots accurately foretold the continuation of the bear market into a third year (at the time, the first accurate result in five years). But the Patriots 2004 Super Bowl win against the Carolina Panthers failed to anticipate a fall rally that helped push the S&P 500 to a near 9% gain that year, sacking the indicator for another loss.

Consider also that, despite victories by the old AFL Denver Broncos in 1998 and 1999, the S&P 500 continued its winning ways, while victories by the NFL legacy St. Louis (by way of Los Angeles) Rams (with the just-retired Arizona quarterback Kurt Warner calling plays) and the Baltimore (by way of NFL legacy Cleveland Browns) Ravens did nothing to dispel the bear markets of 2000 and 2001.

Winning “Streaks”

All in all, the Super Bowl Theory has been on the money more often than not – much more often than not, in fact - but in true sports fashion, has had some winning streaks and some rough patches.  Consider that it “worked” 28 times between 1967 and 1997 – then went 0-4 between 1998 and 2001 – only to get back on track from 2002 on (purists still dispute how to interpret Tampa Bay’s victory in 2003, since the Buccaneers spent their first NFL season in the AFC before moving to the NFC). 

As for Sunday – the oddsmakers are giving the nod to the Colts – but not by much (5 ½ points).

It looks like it could be a good game – and that, whether you are a proponent of the Super Bowl Theory or not – would be one in which whoever wins, we all will!

Note: Other exceptions included: 1970, when AFC Kansas City won, and the S&P index gained 0.1%; 1984, when AFC Los Angeles Raiders won, and the S&P rose 1.4%; 1990, when NFC San Francisco prevailed, and the S&P lost 6.56%; and 1994, when NFC Dallas triumphed, but the S&P index fell 1.53%.