Posted by: Ben Steverman on February 05, 2010
What does the Super Bowl have to do with the stock market? Well, not much.
Yes, occasionally companies can get a lift from effective advertisements. In 2008, for example, E*Trade Financial (ETFC) was facing serious financial difficulties when ads featuring stock-trading babies appeared during Super Bowl XLII. (E*Trade’s chief executive said the ads told customers, “We’re still here, we’re as strong as ever, and we’re not going anywhere.” The ads might have brought in customers – E*Trade survived the financial crisis — but they didn’t help E*Trade’s stock price much: After a brief rebound, shares started slipping in late February. Thirteen months later, they had lost 88% of their value.)
But the actual game — who wins, who loses and how many points are scored — that has no effect on the stock market, right?
There is certainly no rational connection, but that hasn’t stopped market watchers from finding ways to link two great American pastimes anyway. Traders’ heads are full of superstitious beliefs about what drives market psychology. And mountains of market data make it easier to discover even the most far-fetched correlations. Did you know, for example, that, according to the Stock Trader’s Almanac, the Dow Jones industrial average has been up nine of the last 14 Fridays before Mother’s Day? (Thanks, Mom!)
Data provider Capital IQ just issued a lighthearted analysis of stock market returns and the Super Bowl. For what it’s worth, here are some findings:
1. A win by the Indianapolis Colts on Sunday could be good for stocks. On average (based on the last two times the Colts organization won the Super Bowl, in 1971 and 2007), a Colts win correlates to an average annual S&P 500 return of 10%.
2. A win by the New Orleans Saints could also lift stocks. First-time Super Bowl champions (and the Saints would qualify) have occurred in years when, on average, the S&P 500 has returned 9%.
The Saints, a member of the National Football Conference, have another advantage. In the 22 years the NFC has won the Super Bowl, the S&P 500 has risen an average of 15%. When the champion is from the American Football Conference, the average return over 21 years has been just 7%.
3. According to the data, investors would rather see a high-scoring game. In years when the combined Super Bowl score has topped 45, the market has been up 17%. In lower-scoring years, the S&P 500 returned only 7% on average.
4. Finally, a warning from the number-crunchers at Capital IQ, if the Saints lose: In Super Bowl III in 1969, the New York Jets beat the Baltimore Colts 16 to 7. The S&P 500 ended 1969 down 8%.
Businessweek’s Emily Thornton, Amy Feldman, Ben Levisohn, and Ben Steverman focus on matters great and small for investors, from the views of a hot fund manager to an explanation of the latest products devised by Wall Street’s rocket scientists. Exploring trends in any area, from bonds and stocks to closed-end funds and futures, always with an eye towards giving investors a better understanding of the sometimes confusing and often chaotic world of finance. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.