Super Bowl Sunday is just a few weeks away. Immediately after the big game, you will read about the Super Bowl indicator. This indicator predicts the trend of the stock market for the rest of 2018.
Final football seems irrelevant to the stock market. But before deciding to ignore this indicator, you should know that there is a reason why the indicator works. And what does it work, that means we can even use the stock market to predict the outcome of the game.
The Super Bowl indicator is simple. If a former National Football League (NFL) team wins, the Dow Jones Industrial Average is expected to close for the year. If a new American Football League (AFL) team wins, wait a low year.
Economics explains why this works.
Old vs. New
The NFL dates back to 1920. Its early teams included the Chicago Bears, Pittsburgh Steelers, and Cleveland Browns. Those are the Rust Belt towns that were booming in 1920. Manufacturers built those towns.
The AFL played its first games in 1960. Their teams were in booming cities that represented the new economy. Oakland was a tech hub and home to the Raiders. Boston, the tech hub of the East Coast, 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 last 51 years.
There is a logical explanation for this history.
When the old economy is doing well, the fans in those old NFL cities have good jobs. They buy high-priced tickets and provide the cash needed to sign great players who can bring a win.
If the new economy fares better, the teams in those cities house 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 fuels the former NFL and Dow teams.
Actions can predict the game
The Super Bowl gauge isn’t the only tool to watch near the start of the year. The indicator for the first five days of January shows that if the Dow Jones rises during the first five days of the year, the index closes higher about 83% of the time.
By combining the two ideas, we can predict the winner based on the first five days of January. The track record here is better than flipping a coin. The first five days they correctly called the Super Bowl 61% of the time.
This year, the first five days are over. That tells us we should wait for a former NFL team to win the Super Bowl.
Right now, bettors are favoring the Minnesota Vikings and New England Patriots to meet in the Super Bowl. If they’re right, and that’s the showdown, the Vikings are the favorites based on the First Five Days.