Investors Pray for a Giants Win

According to the Super Bowl Market Predictor, the market will rise if New York's team triumphs and fall if the New England Patriots take the prize

by Frank Slusser From Standard & Poor's Equity Research

Presently, Las Vegas odds favor the AFC New England Patriots to win Super Bowl XLII, but Wall Street bettors are wagering on the NFC New York Giants for a positive outcome for the stock market in the Super Bowl Market Predictor.

The Predictor, invented by the late New York Times sportswriter Leonard Koppett, theorizes the stock market will rise only if the winner is the NFC team or an AFC squad that was previously in the National Football League before its 1970 merger with the American Football League. The Super Bowl hypothesis has proved correct 31 out of 41 times, for a 75% success rate.

This market theory was designed for investors and football fans alike, but we wouldn't recommend basing your portfolio on the outcome. This year's awful start for stocks might be hard to recover from, given all the troubles in the credit markets, housing, and financial sectors and the worries about a recession. If the favored Patriots win this year's game, the Super Bowl theory holds that the broad market will drop.

Feb. 3, 2008, will mark the fifth time the Patriots have participated in the grand game and the fourth time for the NFC New York Giants.

Testing the Theory

The S&P 500 rose 31.01% in 1997 when New England lost to the Green Bay Packers and fell 23.2% in 2002 when they defeated the St. Louis Rams. The S&P rose 3% in 2005 and 8.9% in 2004 when the Patriots beat Carolina and Philadelphia, respectively, contrary to what the Predictor would theorize.

The S&P 500 fell 13.04% in 2001 when the Giants lost to Baltimore but gained 26.31% and 2% in 1991 (vs. Buffalo) and 1987 (vs. Denver), respectively, when they won.

Last year the S&P 500 rose 3.53% as the AFC Indianapolis Colts, an original NFL team, beat the NFC Chicago Bears 29-17 in a year that featured high oil prices and a monumental housing bubble burst that spawned the subprime mortgage crisis that still plagues markets.

The S&P rose 13.62% in 2006 as the AFC (but original NFL) Pittsburgh Steelers beat NFC Seattle Seahawks 21-10. According to the theory, the market was set to rise in both 2007 and 2006 no matter who was victorious.

The Patriots' 24-21 win over the NFC Philadelphia Eagles in the 2005 game should have been bearish, but Wall Street bulls wouldn't have it. The S&P 500 rose 3% as the economy grew despite higher oil prices and the Katrina and Rita hurricanes.

The theory also proved incorrect in 2004, as the S&P rose 8.9% after the AFC Patriots beat the NFC Carolina Panthers 32-29.

Complete and Incomplete Passes

After a three-year skid following the tech crash, the S&P rose a stunning 26.4% in 2003 amid the NFC Tampa Bay Buccaneers' 48-21 victory over the AFC Oakland Raiders in the Jan. 26 game. The Buccaneers' victory came as the economy staged a recovery from bubble-burst slide and early-year effects of the Iraq war. Third quarter 2003 GDP grew at an annual rate of 8.2% and raised hopes for continued growth in 2004.

But the S&P fell 23.5% in 2002, and the theory was right for the first time in five years, as the Patriots beat the NFC St. Louis Rams 20-17. The Patriots' 2002 win came as the economy continued in a slowdown, heightened by the continued fallout from the high-tech bubble burst that left millions of investors with large losses. The corporate accounting scandals involving Enron and other companies crushed investor confidence.

In 2001 the stock market lost ground and the Super Bowl theory failed for the fourth consecutive time as the AFC Baltimore Ravens—with NFC roots as the former Cleveland Browns—beat the NFC New York Giants 34-7. The market was supposed to gain ground, but the Baltimore win came as the economy headed into recession and the Fed was cutting rates to ease the pain. The high-tech bubble that popped the year before had extended. And the September 11 attacks on the World Trade Center and the Pentagon dealt the economy an unexpected blow. At yearend the S&P 500 fell 13%.