Super Bowl Sunday is just a few weeks away. Right after the big game, you’ll read about the Super Bowl flag. This indicator predicts the trend of the stock market for the rest of 2018.
The soccer final seems irrelevant for the Stock Exchange. But before you decide 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, expect the Dow Jones Industrial Average to close out the year. If a new American Football League (AFL) team wins, expect a bad year.
Economics explains why this works.
old vs new
The NFL dates back to 1920. Its first teams included the Chicago Bears, the Pittsburgh Steelers, and the Cleveland Browns. Those are Rust Belt cities that were booming in 1920. Manufacturers built those cities.
The AFL played its first games in 1960. Its teams were in boomtowns that represented the new economy. Oakland was a technology hub and the home of the Raiders. Boston’s East Coast tech hub became the home of 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, fans in those old NFL towns have good jobs. They buy high priced tickets and provide the cash needed to sign big players who can bring a win.
If the new economy is doing better, the teams in those cities will host the more 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 drives old NFL teams and the Dow.
Actions can predict the game
The Super Bowl indicator 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 rises during the first five days of the year, the index closes higher about 83% of the time.
Combining the two ideas, we can predict the winner based on the first five days of January. The track record here is better than a coin toss. The first five days they correctly called the Super Bowl 61% of the time.
This year, the First Five Days ended. That tells us we should expect an old NFL team to win the Super Bowl.
Right now, oddsmakers favor the Minnesota Vikings and New England Patriots meeting in the Super Bowl. If they’re correct, and that’s the matchup, the Vikings are the favorites based on the first five days.