For investors who are hard-core football fans, checking out what the so-called "Super Bowl indicator" says about future stock market performance can add a bit of extra entertainment value to the game. While no one advocates aligning your investment strategy with an analysis of market returns that's based on Super Bowl outcomes, the exercise can add to fans' sense of pride. After all, what could be better than your team taking home the coveted Lombardi Trophy, and getting a bit of credit for a stock market rally, too? (But remember, these stats were generated in fun.)
This year, the match-up between the Pittsburgh Steelers and Green Bay Packers forecasts a strong bull market in 2011 no matter which team wins. However, a high scoring victory by the Pittsburgh Steelers may produce the highest returns of all. According to financial data and analytics firm Capital IQ, the average annual return for the S&P 500 index after a Steelers victory has been 26%. The Steelers have won the Super Bowl a record six times, and even when they lost Super Bowl XXX in 1996, the market returned 23%.
Capital IQ says the Packers are equally lucky for the markets. The average return after a Packers victory has been 23%, and even during the two years the Packers played in the Super Bowl and lost, the average market return was 29%. Those calculations suggest that whichever team wins the markets for 2011 are likely to be in the 23% range.
Based on the numbers, investors should also hope for a high-scoring contest. Market returns have tended to trend higher as the total number of points scored during the game rises. Analysts from Schaeffer's Investment Research
split the 44 Super Bowl contests into four groups of 11 each and charted the average return when the total points scored fell within a particular range. The S&P 500 Index performed best when the total number of points scored in the Super Bowl has ranged between 55 and 75, boasting an average gain of 16.63%. By contrast, market returns averaged 12.57% when the total points scored ranged between 45 and 54; 3.02% when the total points scored ranged between 37 and 45 and -0.71% when the total points scored ranged between 21 and 36.
"Maybe the higher scores put traders in a good mood," joked quantitative analyst Rocky White, who worked on Schaffer's research with Elizabeth Harrow.
Although a high-scoring offensive battle won by the Pittsburgh Steelers seems like the scenario that would produce the best market outcome, no matter which team you root for on Super Bowl Sunday, all investors will be rooting for higher market returns.