Kyle here! This week, I figured I'd have some fun and talk to you about one of my favorite days of the year: Super Bowl Sunday.

"Uh, Kyle, this is a personal finance letter. Who cares about sports? And who says 'stoked'?"

Fair point on the latter. But even if you're not even remotely interested in sports, I still might get you to care about Super Bowl LVIII—by appealing to your wallet, or your sense of whimsy.

You see, the Super Bowl is the focal point of one of the goofiest (and one of my favorite) signals of future stock-market performance: 

The Super Bowl Indicator.

The Tea

The Super Bowl spurs conflicting emotions in every football fan. On the one hand, it's the culmination of months of gridiron grind where we determine the NFL's best team this year. On the other hand, it's the last real football we'll watch for months.

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Of course … if you're not like me, you might be watching the Super Bowl anyways. Maybe you'll watch to catch Usher's halftime show. Maybe you'll watch to check out the ads. Maybe you're just hoping to enjoy the less than 25 seconds they actually show Taylor Swift. (No, seriously, if you whine about Taylor Swift, rethink your whole worldview.)

But maybe you're one of those people who rolls their eyes and asks "Who even watches the Super Bowl?"

Oh, you won't like that answer.

Last year, nearly 115 million people watched it … and that was just in the U.S. You can certainly up that number given that Super Bowl LVII was aired live in more than 190 countries and territories in more than 25 languages.

That 115 million U.S. viewers, by the way, was more than double the No. 2 primetime broadcast which was … oops! Another NFL game. In fact, you have to go all the way down to the 15th-most-watched broadcast to find something that wasn't the NFL.

In short: Don't hate.

Anyways, going back to the point of all this … the Super Bowl isn't just an event where die-hard NFL fans and casual looky-loos can join forces to spend a few hours of mindless viewing together.

It's an event that some Wall Streeters consider a crystal ball. Indeed, the winner of Super Bowl LVIII might very well determine the direction of the stock market for the rest of 2024.

The Take

Investors are commonly on the lookout for market signals that can help them get an edge. Economic data, for instance, or stock charts are two great sources for useful indicators that active investors can put to work.

Sometimes, though, market analysts look a little farther afield—OK, a lot farther afield—to figure out what the stock market will do next. In fact, going to a psychic or reading tea leaves would be downright scientific compared to the methods that would-be stock market prognosticators employ to get an investing edge. 

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Big Mac prices. Cardboard box manufacturing. Lipstick and men's underwear sales. The cover of the Sports Illustrated Swimsuit Issue. These are all things that (allegedly) functional human beings have used to determine which way stocks might swing.

But perhaps the most famous of these outside-the-box cues is the Super Bowl Indicator, which was first coined in 1978 by New York Times sportswriter Leonard Koppett. In short, it goes like this:

• If the Super Bowl's winner comes from the original National Football League (now the National Football Conference, or NFC), stocks will rise for the rest of the year. 
• If the Super Bowl's winner comes from the original American Football League (now the American Football Conference, or AFC), stocks will fall for the rest of the year.

If that sounds ridiculous, that's because it is.

At this point, if the heavy dollops of sarcasm haven't already clued you in, the Super Bowl has zero material effect on the stock market. I can't repeat this enough: You shouldn't actually invest based upon the outcome.

The Super Bowl Indicator is merely a welcome bit of nonsense that helps spice up a typically dry financial topic. And nonsense is good for the soul.

So let's explore this nonsense a little further, shall we?

To his credit: When Koppett identified this signal, it had never been wrong before. The Super Bowl Indicator, as of 1978, was undefeated.

Fast forward a few decades, however, and its track record deserves a little more scrutiny. Fortunately, I know dozens of market experts who discuss the subject every year. And helping us today is one of those experts: Ryan Detrick, Chief Market Strategist at Carson Group (and a pretty good LinkedIn follow if you're an investor), who recently penned his annual thoughts on this phenomenon.

Take it away, Ryan!

"We like to make it a little simpler and break it down by how stocks do when the NFC wins versus the AFC, ignoring the history of the franchises," Detrick says. "As our first table shows, the S&P 500 gained 10% on average during the full year when an NFC team won versus 7.5% with an AFC team won."

It's not perfect, of course. The NFC's Rams lost in 2022, and stocks ended up declining 14% between the game and the end of the year. Still, if we're playing the averages, we'd want the 49ers to win Super Bowl LVIII, right?

"Maybe not, as stocks have gained the full year 11 of the past 12 times when a team from the AFC won the championship going back 20 years," Detrick says. "In fact, the only time stocks were lower was in 2015, when the full year ended down -0.7%, so virtually flat."

OK, so, the Super Bowl Indicator has been on the fritz of late. But Detrick stumbled upon what could be a much more reliable signal from this Sunday's tilt—and suggests that rather than cheering for one conference or the other, you might want to root for a blowout.

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"When it is a single digit win in the Super Bowl, the S&P 500 is up less than 6% on average and higher about 60% of the time," Detrick says. "A double-digit win? Things jump to about 11% and 79%. And wouldn't you know it, when the final score is three touchdowns or more, the S&P 500 gained 13.6% for the year and is higher about 85% of the time."

Just look at the stock market's performance following blowouts:

Of course, just how dependable all this data is depends on how much confidence you have in a guy who insists the Cincinnati Bengals will ever win a Super Bowl. At best, he's delusional.

But more importantly, these signals are all nonsense—all correlation and no causation. They're just a way to make investing a little more fun.

Editor's Note: Kyle Woodley is a Cleveland Browns fan. Anyone blaming their bad 2023 season on quarterback injuries can kindly see themselves out the door. Thank you, Joe Flacco, for your service.

Riley & Kyle

WealthUp (Young and the Invested is now WealthUp)

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