The Super Bowl Indicator and Stocks

Are you making your Super Bowl plans now? While the clock is running down until game time, market historians remind us that the winner of the Super Bowl could offer clues on how the stock market will perform in 2022.

Really?

New York Times sportswriter Leonard Koppett developed the Super Bowl Indicator back in 1978. While at first this was a cheeky little theory, it has surprisingly shown teeth over the past 44 years, with a fairly impressive accuracy rate. What is this rule? Huddle up.

The Super Bowl Indicator states that the Dow Jones Industrial Average will close out the year with a positive return if the team from the National Football Conference (NFC) – or one with original NFC roots – wins the Super Bowl. On the flip side, this indicator warns that the DJIA will record losses at year-end if the American Football Conference (AFC) team wins the big game.

Looking back throughout history, from 1967-2015, the Super Bowl indicator reveals an accuracy rate of 82%. That is, indeed, better than a coin flip.

While this may be a fun statistic, Wall Street experts explain there is no real connection between who wins the Super Bowl and stock market performance.

At the crux of the matter is a simple rule: correlation does not equal causation.

Sorry to disappoint, but the Super Bowl Indicator’s past performance is simply a coincidence. Indeed, if the stock market ends the year with a loss and the Cincinnati Bengals take home the trophy on Sunday, it would be pure coincidence.

For you, as an investor, it is correlation that truly matters. And, in diversification – non-correlated assets – like physical gold – are one way you can protect your blind side.

Gold’s lack of correlation to other assets is one of its strengths in your portfolio. No- or low-correlation means, for example, that when stocks crash, gold typically climbs.

For optimal risk-adjusted performance, the traditional 60% stocks – 40% bond portfolio should be set instead at 60% stocks, 5% bonds and 35% gold, according to GraniteShares’ research. Annualized portfolio returns increased when gold was added to the portfolio.

Last month’s January stock market losses revealed how vulnerable equities are to getting sacked.

It may be time to bolster your defensive package. It’s still the first down of the year when it comes to your portfolio. There’s still time to round out your bench with diversification that is statistically significant – like increasing your allocation to physical gold.

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