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

From Standard & Poor's Equity ResearchPresently, 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%.

Touchdowns and Gains

The NFC St. Louis Rams' 23-16 victory over the AFC Tennessee Titans in January, 2000, should have been bullish, but the S&P index fell 10.1% for the year. In the previous two years, the S&P posted strong gains even though AFC's Denver won the championship each time. St. Louis's 2000 victory occurred when the economy was strong, but the pace slowed later in the year as the high-tech bubble, which reached its peak in the first quarter, burst and produced a major downtrend, which was fanned further by Fed credit tightening.

AFC Denver's 1999 victory against the NFC Atlanta Falcons 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 Bill Clinton was acquitted by the Senate. But the market rose 19.5%.

Denver's 1998 win vs. Green Bay should have signaled a market decline, as Asia was engulfed in a financial crisis that could influence the economies of the rest of the world. Also, President Clinton was involved in a sex scandal that led to his impeachment late in the year. 1998 also saw Russia default on its debt, the Fed engineer a major rescue of hedge fund Long Term Capital Management, which came close to collapsing and disrupting markets globally. Fed credit easing helped prevent the collapse, and drove stocks sharply higher. Clinton's problems had little impact on markets, unlike the 1973-74 Watergate scandal that ended with Richard Nixon resigning in 1974. The S&P 500 finished the year up 26.7%.

The other exceptions include 1994, when NFC's Dallas Cowboys beat Buffalo, while the "500" shed 1.53% as Greenspan tightened credit to thwart inflation before it began; 1990, when the NFC San Francisco 49ers beat Denver, while the index fell 6.56% as Saddam Hussein invaded Kuwait, setting the stage for the Gulf War; 1984, when the AFC Los Angeles Raiders beat NFC Washington Redskins, but the S&P 500 gained 1.4%; and 1970, when the AFC Kansas City Chiefs defeated the Minnesota Vikings, but the S&P 500 edged up 0.1% (a gain is a gain!).

Proving the Theory Correct

Some other years that produced outcomes in line with the theory include:

In 1981, Oakland beat Philadelphia; S&P fell 9.7%. The nation went into recession in July. President Ronald Reagan's team said it couldn't have seen it coming, although everybody on Wall Street did.

In 1977, Oakland beat Minnesota; the S&P fell 11.5%. This was President Jimmy Carter's first year in office, and Eliot Janeway accused his Cabinet of running an open-mouth administration.

The Miami Dolphins of the AFC won the Super Bowl in two consecutive years—1973, with a 14-7 win over the Washington Redskins, and 1974, with a 24-7 victory over the Minnesota Vikings. The stock market suffered a two-year bear market that took prices down more than 50% (17.4% and 29.7%, respectively). The nation was beginning the worst recession since 1938; oil prices were sky-high, and President Nixon was about to resign because of the Watergate scandal. Furthermore, the Vietnam War was dragging on, ripping the nation apart.

So while the Super Bowl Market Predictor has a decent record, please remember it's for amusement purposes only. Just like betting on who will be Patriots' quarterback Tom Brady's next supermodel girlfriend.