Now that the Super Bowl is over, it’s time to look at the impact the game might have on the stock market. Not because of the amount of revenue a huge sporting event like the Super Bowl generates for the economy, but rather the infamous Super Bowl Indicator for the stock market.
The Indicator says that if a team from the NFC wins, the stock market will be up. So unless you live in Denver, as an investor you should be thrilled that Seattle won, since they are from the NFC. And over the years, this Indicator has been correct 33 out of 41 times, as measured by the Dow Jones Industrial Average—a success rate of over 80%!
But hold on, there could be a fly in this Super Bowl Indicator ointment. While the Seahawks are in the NFC, there was a time from 1977-2001 when Seattle was actually in the AFC of the National Football League. So could this past history of being in the AFC impact the Super Bowl Indicator this year? No, there is absolute no correlation to a football team or league winning to that of the Dow Jones Average. Despite its alarmingly high success rate, it is not something investors should ever use as a predictor. In fact, investors should ignore most indicators because they are dangerous. It is dangerous to wage one’s hard-earned assets on systems that make no sense. It is challenging enough to invest prudently and then watch the market decline.
The bottom line is that while this is a fun way to spend our post-Super Bowl life, the key to good investing is NOT to try to time the market based on who wins the Super Bowl or any other fool-proof mechanism.
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