What Does the Super Bowl Mean to the Market?

Joel Anderson |

Super bowl indicator on Wall StreetThe stock market is a vast and complicated mechanism, combining hundreds of different market trends from around the globe along with thousands of different companies into a complex and unpredictable economy that's driven by broad macro-economic factors that affect us all, right? Wrong! The really important information is the Super Bowl!

The Super Bowl Indicator Theory

Okay, so the idea that the winning league in the Super Bowl will accurately predict the direction of the market over the next year is ridiculous, right? There's no real connection between the old AFL/NFL divide and something so important as the Dow Jones Industrial Average? Common sense would say no.

However, the idea that wins by original AFL teams winning the Super Bowl foretells a bear market while original NFL teams winning predicts a bull market persists. Why? Because, judging by the Dow Jones, the predictive powers of the Super Bowl Indicator is now 33-for-41 and went five for seven between 2002 and 2007. Whoops.

Once again, common sense would seem to indicate that this is obviously a coincidence, but when one considers that Peter Lynch once said that a success rate of six out of 10 for stock-picking is enviable, it's hard to completely ignore data like that. Of course, one might also try to hone in even further.

This year's match-up pits the New York Giants of the NFC against the New England Patriots of the AFC, a rematch of the 2008 Super Bowl. The Giants won the last match-up...and the stock market suffered its worst crash since the Great Depression. That would mean that 100 percent of the time that the Giants have beaten the Pats in the Super Bowl the stock market took a massive tumble. One can expand that even further when considering that the Giants won their first Super Bowl in...1987. Food for thought, folks.

Other Super Bowl Effects

In a much more concrete, real way, the Giants could hurt the markets marginally with a win. Why? Because the long odds on the team winning the Super Bowl offered by Vegas bookmakers last year got snapped up by Giants fans. As recently as last month (when the Green Bay Packers and New Orleans Saints had to be considered prohibitive favorites to represent the NFC in the Super Bowl) the odds of the Giants winning the Super Bowl were as high as 100-1.

While sports books like those at Wynn Resorts (WYNN), MGM Resorts (MGM), and Las Vegas Sands (LVS) try to balance bets so that the outcome of games won't affect the bottom line, futures bets can often mean that this balance gets thrown off if major underdogs have success. Sports books took a beating in 2008 as well on the Giants unlikely run that year, and another Giants win could mean another hit.

“We’re pretty strung out on the Giants and we’re not alone,” Chris Andrews, director of race and sports for Cal Neva’s sports books, said in a telephone interview with Bloomberg. “As far as the future book goes, we certainly don’t want to see the Giants win.”

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
LVS Las Vegas Sands Corp. 57.38 0.21 0.37 3,643,534
MGM MGM Resorts International 25.65 -0.14 -0.54 8,546,909

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