Super Bowl Sunday is just weeks away. Right after the big game, you’ll read about the Super Bowl indicator. This indicator predicts the stock market’s trend for the rest of 2018.
The football final seems irrelevant to the stock market. But before you decide to ignore this indicator, you need to know there’s a reason the indicator works. And since it does work, that means we can even use the stock market to predict the outcome of the game.
The Super Bowl indicator is simple. If an old National Football League (NFL) team wins, expect the Dow Jones Industrial Average to close up for the year. If a new American Football League (AFL) team wins, expect a down year.
The economy explains why this works.
Old vs. New
The NFL dates to 1920. Its first teams included the Chicago Bears, Pittsburgh Steelers and Cleveland Browns. Those are Rust Belt cities that were booming in 1920. Manufacturers built those cities.
The AFL played its first games in 1960. Its teams were in booming cities that represented the new economy. Oakland was a technology center and home to the Raiders. East Coast technology hub Boston became home to the Patriots in the new league.
The Super Bowl Indicator Works for a Reason
This indicator was correct 75% of the time in the past 51 years.
There is a logical explanation for this track record.
When the old economy does well, fans in those old NFL cities have good jobs. They buy high-priced tickets and provide the cash needed to sign great players that can bring a victory.
If the new economy is faring better, teams in those cities are home to the most expensive players and are more likely to win.
Manufacturing companies are the symbols of the Rust Belt economy, and these companies dominate the Dow Jones Industrial Average. A healthy manufacturing economy boosts the teams of the old NFL and the Dow.
Stocks Can Predict the Game
The Super Bowl indicator isn’t the only tool to watch near the start of the year. The First Five Days of January indicator shows that if the Dow goes up over the first five days of the year, the index closes higher about 83% of the time.
Combining the two ideas, we can forecast the winner based on the first five days of January. The track record here is better than flipping a coin. The First Five Days correctly called the Super Bowl 61% of the time.
This year, the First Five Days were up. That tells us to expect an old NFL team to win the Super Bowl.
Right now, oddsmakers favor the Minnesota Vikings and New England Patriots to meet in the Super Bowl. If they are correct, and that’s the matchup, the Vikings are the favorite based on the First Five Days.