Objective information about retirement, financial planning and investments

The Super Bowl and Your Investments

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Lombardi Trophy - Super Bowl XXXI

Update, with the Patriots’ win yesterday the indicator says the markets should have a down year in 2019. As I mention below, the indicator has been wrong for three years running, as investors let’s hope for a fourth year.

It’s Super Bowl time and once again my beloved Packers are not playing for the for the eighth consecutive year. They had a horrible season and lost or tied a number of games they could have (and should have) won. The good news is that I was able to attend three regular season games at football’s holy shrine, Lambeau Field and a fourth at the Los Angeles Coliseum.

Every year the Super Bowl Indicator is resurrected as a forecasting tool for the stock market.

The indicator says that a win by a team from the old pre-merger NFL is bullish for the stock market, while a win by a team from the old AFL is a bad sign for the markets. Looking at this year’s game, New England is an original AFL team while Los Angeles is an original NFL team.

How has the Super Bowl Indicator done?

In 2018 this indicator failed to predict the direction of the stock market for the third year in row. Denver won the 2016 game and the market had an up year. The Patriots won the 2017 game and it was a stellar year for the markets. The Eagles won last year and 2018 was the first down year for the S&P 500 since 2008. Overall the indicator has held true for 40 of the 52 prior Super Bowls.

Quoted in a Wall Street Journal article before the 2016 game, respected Wall Street analyst Robert Stoval said, “There is no intellectual backing for this sort of thing, except that it works.”

Some notable misses for the indicator include:

  • St. Louis (an old NFL team that was formerly and is now again currently the L.A. Rams) won in 2000 and the market dropped.
  • Baltimore (an old NFL team that was formerly the original Cleveland Browns) won in 2001 and the market dropped. Perhaps the markets were confused since the Browns became an AFC team (along with the Steelers and the Colts) as part of the 1970 merger.
  • The New York Giants (an old NFL team) won in 2008 and the market tanked in what was the start of the recent financial crisis.
  • In 1970 the Kansas City Chiefs shocked the Minnesota Vikings and the Dow Jones Average ended the year up, by less than 5 percent.

Is this a valid investment strategy?

As far as your investments, I think you’ll agree that the outcome of the game should not dictate your strategy. Rather I suggest an investment strategy that incorporates some basic blocking and tackling:

  • financial plan should be the basis of your strategy. Any investment strategy that does not incorporate your goals, time horizon, and risk tolerance is flawed.
  • Take stock of where you are. What impact has the bull market of the past ten years had on your portfolio? Perhaps it’s time to rebalance and to rethink your ongoing asset allocation.
  • Costs matter.  Low cost index mutual funds and ETFs can be great core holdings. Solid, well-managed active funds can also contribute to a well-diversified portfolio. In all cases make sure you are in the lowest cost share classes available to you.

View all accounts as part of a total portfolio. This means IRAs, your 401(k), taxable accounts, mutual funds, individual stocks and bonds, etc. Each individual holding should serve a purpose in terms of your overall strategy.

The Super Bowl Indicator is another fun piece of Super Bowl hype. Your investment strategy should be guided by your goals, your time horizon for the money and your tolerance for risk, not the outcome of a football game.

Not sure if your investments are right for your situation? Concerned about stock market volatility? Approaching retirement and want another opinion on where you stand? Check out my Financial Review/Second Opinion for Individuals service for detailed guidance and advice about your situation.

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Photo credit:  Flickr

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Comments

  1. On point! I’ve always found it baffling strategizing based on outcomes of hyped sports events. Better to stick to the fundamental — financial planning. It’s more reasonable and actually smarter.

    • Roger Wohlner says

      Thanks for the comment. This post was a bit tongue in cheek, clearly (I hope) nobody would adjust their investments based on who wins on Sunday.

  2. Great post! Being from New England I can’t say I’m a fan of either Carroll or Manning but I’ll be rooting for the Seahawks if it means the market will go up!

  3. Agreed that far-fetched market indicators like super bowl outcome or the January effect are not things to use for investment strategies. People should rely on their own financial plan to determine their strategy.

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