A Super Year For Stocks?

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Football fans and investors have reason to cheer. No matter who wins Super Bowl XL between the Pittsburgh Steelers and Seattle Seahawks on Feb. 5, the stock market should rally in 2006. Why? The victor will be either a National Football Conference [NFC] team or one with roots in the NFC. Here lies the premise of the Super Bowl Predictor Theory.



The theory, invented by the late New York Times sportswriter Leonard Koppett, says if the NFC team -- or an American Football Conference [AFC] squad that originally was an NFC member -- wins the game, the stock market, as measured by the S&P 500-stock index, will rise for the year. Conversely, if the AFC team wins, the market will go down.



DIDN'T BEAR IT. For such a fanciful forecasting tool, the theory has an impressive record: It has proven itself right 29 out of 39 times, a 74.4% success rate.



This year, Pittsburgh's 34-17 upset over the Denver Broncos made the Super Bowl Theory a lock because the Steelers are an original NFC team. The Seahawks also belong to the NFC.



The AFC New England Patriots' 24-21 win over the NFC Philadelphia Eagles in the 2005 game should have been bearish, but it ended up a positive event for Wall Street [see BW Online, 2/3/05, "The Bulls Pull for the Eagles"]. The S&P 500 rose 3% for the year despite higher oil prices, while the economy held up even after the devastating hurricanes Katrina and Rita.



TECH-BUBBLE PENALTY. The S&P 500 rose 8.99% in 2004 after the AFC Patriots beat the NFC Carolina Panthers 32-29. That outcome lowered the Super Bowl Theory's accuracy a bit.



In 2003, the S&P index rose a stunning 26.38% after a three-year slide following the high-tech bubble. That year, the NFC Tampa Bay Buccaneers beat the Oakland Raiders 48-21 in the championship game.



However, the S&P fell 23.5% in 2002, and the theory hit the mark for the first time in five years after the Patriots beat the NFC St. Louis Rams 20-17. That year, the economy continued in an economic slowdown, heightened by the continued fallout of the high-tech bubble deflation that left millions of investors with large losses. The corporate accounting scandals involving Enron and other companies that crushed investor confidence certainly didn't help either.



CLINTON SAVE. The Super Bowl Theory had a losing streak for the prior four years. The stock market lost ground in 2001 after the AFC Baltimore Ravens -- which has NFC roots as the former Cleveland Browns -- beat the NFC New York Giants 34-7. According to the theory, the market should have gained ground in 2001. But the economy headed into recession and the Fed used rate cuts to ease the pain. The Sept. 11 attacks on the World Trade Center in New York City and the Pentagon area dealt the economy an unexpected blow.



The NFC St. Louis Rams' 23-16 victory over the AFC Tennessee Titans in 2000 should have been bullish, but the S&P index fell 10.1% for the year. The market peaked in the first quarter of 2000, and then tumbled and produced a major downtrend, which was fanned further by Fed credit tightening.



In the previous two years, the S&P index posted strong gains even though AFC's Denver won the championship each time. Denver's 1999 victory came at a time when the economy picked up steam as the year progressed, inflation remained tame, Wall Street went crazy for dot-com IPOs, traditional valuations disappeared, and Clinton received an acquittal from the Senate.



A GRAIN OF SALT. Denver's 1998 win came at a time when the domestic economy prospered, but Asia was engulfed in a financial crisis that threatened the economies of the rest of the world. Also, a sex scandal led to President Clinton's impeachment late in the year. That year, Russia defaulted on its debt, while the Fed engineered a major rescue of hedge fund Long Term Capital Management, which came close to collapsing and disrupting markets globally.



Other exceptions included: 1970, when AFC Kansas City won, and the S&P index gained 0.1%; 1984, when AFC Los Angeles Raiders won, and the S&P rose 1.4%; 1990, when NFC San Francisco prevailed, and the S&P lost 6.56%; and 1994, when NFC Dallas triumphed, but the S&P index fell 1.53%.



Another interesting stat about the Super Bowl Theory: Pure AFC teams have won 11 of 38 games. Six of those victories coincided with economic slowdowns or recessions.



CHECK OUT THE STATS. Indeed, the theory has had a decent run as a market predictor. But it would be silly to follow it as an investing strategy. As we've pointed out in years past, the Super Bowl Theory is for amusement purposes only. This year, even with Pittsburgh favored to win the championship, either way the stocks look ready to score.



Here's how the Super Bowl Theory has performed in the last 39 years:



The Super Bowl Theory -- 1967-2005



Year



Outcome



Winning Conference



S&P 500 Performance



1967



Green Bay 35, Kansas City 10



NFC



+20.1%



1968



Green Bay 33, Oakland 14



NFC



+7.7%



1969



New York Jets 16, Balt. Colts 7



AFC



-11.4%



1970



Kansas City 23, Minnesota 7



AFC



+0.1%



1971



Baltimore 16, Dallas 13



NFC



+10.8%



1972



Dallas 24, Miami 3



NFC



+15.7%



1973



Miami 14, Washington 7



AFC



-17.4%



1974



Miami 24, Minnesota 7



AFC



-29.7%



1975



Pittsburgh 16, Minnesota 6



NFC



+31.5%



1976



Pittsburgh 21, Dallas 17



NFC



+19.2%



1977



Oakland 32, Minnesota 14



AFC



-11.5%



1978



Dallas 27, Denver 10



NFC



+1.1%



1979



Pittsburgh 35, Dallas 31



NFC



+12.3%



1980



Pittsburgh 31, L.A. Rams 19



NFC



+25.8%



1981



Oakland 27, Philadelphia 10



AFC



-9.7%



1982



San Francisco 26, Cincinnati 21



NFC



+14.8%



1983



Washington 27, Miami 17



NFC



+17.3%



1984



L.A. Raiders 38, Washington 9



AFC



+1.4%



1985



San Francisco 38, Miami 16



NFC



+26.3%



1986



Chicago 46, New England 10



NFC



+14.6%



1987



N.Y. Giants 39, Denver 20



NFC



+2.0%



1988



Washington 42, Denver 10



NFC



+12.4%



1989



San Francisco 20, Cincinnati 16



NFC



+27.3%



1990



San Francisco 55, Denver 10



NFC



-6.6%



1991



N.Y. Giants 20, Buffalo 19



NFC



+26.3%



1992



Washington 37, Buffalo 24



NFC



+4.5%



1993



Dallas 52, Buffalo 17



NFC



+7.1%



1994



Dallas 30, Buffalo 13



NFC



-1.5%



1995



San Francisco 49, San Diego 26



NFC



+34.1%



1996



Dallas 27, Pittsburgh 17



NFC



+20.3%



1997



Green Bay 35, New England 21



NFC



+31.0%



1998



Denver 31, Green Bay 24



AFC



+26.7%



1999



Denver 34, Atlanta 19



AFC



+19.5%



2000



St. Louis 23, Tennessee 16



NFC



-10.1%



2001



Baltimore 34, New York 7



NFC



-13.0%



2002



New England 20, St. Louis 17



AFC



-23.5%



2003



Tampa Bay 48, Oakland 21



NFC



+26.4%



2004



New England 32, Carolina 29



AFC



+9.0%



2005



New England 24, Philadelphia 21



AFC



+3.0%