Super Bowl Indicator: The Bizarre Link between Football and Stock Markets
One of the major highlights this week was the Super Bowl 2022 which took place on Sunday. As it goes with the previous years, this year’s championship game was also well-received amid much pomp and enthusiasm. However, did you know there is more to the Super Bowl than as a show that perpetually glues people to their couches for its entire duration?
The Super Bowl has a fascinating relationship with the stock markets which are expected to waver every year around the same time the football game takes place.
What is the Super Bowl Indicator?
The Super Bowl Indicator has been defined as “a nonscientific stock market barometer”. Simply put, it is a theory that suggests a link between the Super Bowl-winning team and the stock markets. According to this theory, if a National Football Conference (NFC) team wins the Super Bowl, it could spell bullish for the stock markets that year. In contrast, if a team from the American Football Conference (AFC) emerges victorious, the stock markets would slump for the rest of the year.
Correlation ≠ Causation
Although the Super Bowl Indicator has enjoyed a success rate of 90% between 1998 and 2001, it needs to be reckoned that the Super Bowl has clearly no effect on the stock markets. In other words, the world has been merely indulging the correlational relationship between stocks and the football game since an interesting pattern emerged, particularly during the dot com era (1998-2001).
As per data from the S&P 500 Index, the Super Bowl Indicator has been accurate 40 out of 54 times. However, despite its success rate of 74.6%, the Indicator failed to predict one of the most disastrous stock market crashes in 2008 since the Great Depression, even after the New York Giants (an NFC team) won the game.
This reinforces the adage that correlation does not amount to causation, and goes to show that sports and stocks can have interesting intersections every now and then.