WASHINGTON. For stock-pickers and market prognosticators, this is the week of Super Bowl LIII. So what does this have to do with anything on Wall Street, you ask? If you’re a long time trader or investor, you probably know. If not, read on. We’ll introduce you to the famous stock market Super Bowl Indicator. It’s an easy-to-understand and a sometimes accurate gauge of how stock market averages will end up on the last trading day of the current year.
We begin with a brief, self-indulgent rant
Keeping with our recent tradition, we won’t be watching this year’s Super Bowl LIII. That’s largely a matter of sour grapes and politics, as in too many knees taken by spoiled, grossly overpaid NFL players over the past couple of seasons.
As for the actual sports part of our sour grapes attitude, you have to understand. Our hometown team, the Washington Redskins, continues, frankly, to suck. Badly.
Meanwhile, our original hometown team, the Cleveland Browns, has consistently floundered as well. This consistently disorganized batch of hapless saps has been doing so ever since its reincarnation in 1999 as an NFL expansion team in the American Football Conference (AFC). That occurred after the original team’s villainous owner, Art Modell, moved the historic NFL franchise to Baltimore as the re-christened Ravens in the mid-1990s.
Yet things may be looking up for those star-crossed Brownies. They actually started playing real football around the midpoint of the current season. Maybe there’s hope for this hapless team during the 2019 regular season. We’ll see.
But if the Browns can finally look forward to a potential winning season at last, so, too, can our still-battered Mr. Market plausibly look ahead and see real potential for a winning Wall Street season in 2019?
Super Bowl Indicator: Background
Which gets us back to that Super Bowl Indicator. How it works is simplicity itself. As you recall, the National Football League and the upstart American Football League agreed to merge in 1970. The all-new National Football League initially divided along more or less traditional lines, into the National Football Conference (NFC) and the American Football Conference (AFC). It was agreed that at the end of each regular season, the championship team from each conference would battle each other in the post-season game that became known as the Super Bowl. That game, in fact, had already come into existence a few seasons prior to the merger.
Needless to say, the current Super Bowl has only one winner each year. Either the AFC champs or the NFC champs. And that’s what gives us the Super Bowl Indicator. If the NFC champ wins the Super Bowl, then the stock market will have a winning season in the current year, closing up for the calendar year on the last trading day in December. But if the AFC champs win the championship game, the stock market will have a losing season by the time the last trading day of December rolls around.
Oh. One complication. Longtime football fans will remember that as part of the NFL-AFL merger agreement, three of the original NFL teams – the Baltimore Colts, the Cleveland Browns and the Pittsburgh Steelers – would move to the American Football Conference so plausible regional divisions could be created.
Insofar as the Super Bowl Indicator is concerned, these three teams are considered as old NFL teams. Thus, the Super Bowl Indicator is adjusted for this historical fact, in that if a current NFC team OR an OLD NFL team wins the Super Bowl, the market closes up in December just the same.
Some complications in keeping the Indicator organizational chart clear
Frankly, since the Baltimore Colts decamped for Indianapolis some years ago, we would guess that it’s now the Indianapolis Colts that retain the OLD NFL designation. So does Pittsburgh. But as for the current Browns and the current Baltimore Ravens (the OLD Cleveland Browns), who knows how the current teams count.
At any rate, none of these teams will be on the gridiron for Super Bowl LIII this Sunday, so we don’t have to worry about it in 2019. What we do have to consistent about is this: Bullish traders and investors simply must cheer the Los Angeles Rams on to victory.
Follow us here.
The Rams actually started out as the Cleveland Rams(!) in the 1930s; decamped for LA after the Second World War as the old-time Cleveland Browns took over Cleveland Stadium; moved to St. Louis for awhile; and then returned to LA. Super Bowl Indicator-wise, this makes them an old NFL and a current NFC team. Which is why they absolutely must win this Sunday.
Right, it’s weird. But people bet on the Super Bowl Indicator every year. That’s because, while it isn’t a perfect market indicator, over the years, it’s worked more often than not the last time we checked the stats. Even better, it’s a hell of a lot easier to game the market based on a single football game than it is to pore over all sorts of charts and determine exactly which headlines could clobber your stocks or your entire portfolios this year.
So if you’re a bull: GO RAMS!
Maybe we should talk about stocks now. Like Allergan. Ugh…
We’ve spent a fair amount of time on the Super Bowl Indicator today because the market action Tuesday is proving so inconclusive we can’t really say anything useful about it. But here are a couple of anecdotes to close out today’s column.
Our cursed Allergan (trading symbol: AGN) shares took a header from the opening bell this morning after reporting a decent quarter with earnings that ended up nicely in the analysts’ consensus range. The problem here was management’s modestly dour outlook for the fiscal year ahead, which came in below consensus. Which is always a death-knell for a stock’s price, fair or not.
The inevitable generic competition for the company’s cash cow, dry-eye eyedrops formulation Restasis was realistically factored in. But the company has also given up for now on its plan to sell its not-so-hot womens’ products division. The company also took a big write-down on another disappointing division as well.
Shareholders, who promptly began selling the hell out of the shares, viewed this quite dimly. They’re currently down almost $13 per share as we head for the 4 p.m. ET close. Depressing, as they were exceeding the $160 per share mark a couple of trading days ago. Now, BAM! They’re down around $145 per share on heavy volume. Looks like another long quarter.
When a stock is hated, it is hated for a long time. Too bad if you happen to hold it
Traders ignored the good news in favor of the bad. The company raised its dividend a bit. It also announced another $2 billion share buyback plan for 2019 (which has the effect of raising earnings per share).
But that wasn’t enough to satisfy holders of this unfortunately hated major pharma company, whose famous Botox product still generates tons of income. Maybe some of the institutional shareholders who think current management needs to be kicked out are right. We wouldn’t be surprised to see some kind of revolt at this May’s annual shareholders meeting.
After Allergan, do we have another bad Apple?
While the Dow is up slightly running into the close, both the S&P 500 and the tech-heavy NASDAQ are drooping, though both are off less than 1 percent on the day. That’s likely due to considerable headline risk coming from Apple (AAPL). The company reports its numbers after the bell today and they’re likely to track with the company’s previously announced poor quarterly sales figures pertaining to their latest iPhone offerings.
Making matters potentially worse is the company’s announcement of a glaring security hole in its latest iOS operating system, which covers both the iPhone and the iPad product lines. (See our earlier piece on this security flaw here.)
Up slightly earlier in the day, AAPL is trending down into the close, off over 1 percent. The company usually gets hit around earnings reports, whether they’re good or bad, so we may need to hold onto our hats for this one.
Bottom line. Tomorrow is another day. Let’s go there. Fast. And watch that Super Bowl Indicator this Sunday.
— Headline image: LA Rams gear. 2019 Conference Champion hat, official team logo. (Via LA Rams web site, fair use)