The Super Bowl Indicator (SBI) has gained some traction as a predictor of the future direction of US equities. First posited by sportswriter Leonard Koppett in 1978, the hypothesis is this: that a Super Bowl win for an American Football Conference (AFC) team predicts a bear market in the coming year. In contrast, a win for a team from the National Football Conference (NFC) foretells a bull market.1
This year’s big game, held in Las Vegas on 11 February, will pit the AFC’s Kansas City Chiefs against the NFC’s San Francisco 49ers. So, a win for the Chiefs (looking for back-to-back championships) might, in theory, point the way to a stock market downturn. On the other hand, a win for the 49ers (in their eighth Super Bowl appearance overall) would make for a bull market and happy days for investors.
As hard-nosed investors will tell you, correlation and causation are two very different things.
But how accurate has the indicator been? Unfortunately for gridiron afficionados the world over, the answer is not very. Although the indicator had never been wrong at the time of Koppett’s original thesis, its more recent form has been woeful, being right only six times over the past 20 Super Bowls (from 2004 through to 2023, see table below).
As hard-nosed investors will tell you, correlation and causation are two very different things. While we’ll be watching Super Bowl LVIII with interest (not least for its fabled half-time extravaganza) we won’t be holding our breath to learn what it has to tell us about future returns.
Super Bowl Indicator (SBI) and S&P 500 returns
Our view
We note that 2024 has started with echoes of 2020. The same teams who competed for the 54th Super Bowl, the Kansas City Chiefs and San Francisco 49ers, are meeting again on Sunday and it looks more than likely that we will have the same Presidential candidates vying for the White House too.
While some may look to the Super Bowl Indicator to predict future returns of the S&P 500, it is worth noting that in every election year since the inception of the Russell 2500 Index, (US small and mid-cap companies) it has outperformed the S&P 500. This is certainly one trend which we hope will repeat in 2024.
Putting Super Bowl or political wins or losses to one side, our outlook for the year ahead remains broadly the same: we are optimistic on US equity markets and in particular for the prospects of small and mid-cap companies. The US economy, and importantly the US consumer, remains healthy and the Fed’s fight against inflation appears on track. Earnings estimates for S&P 500 in 2024 are low double digits, and higher for US SMID.
US SMID looks attractive from a valuations perspective, too – and the asset class continues to trade at a historically large discount to US large cap.
If 2023 was dominated by the Magnificent Seven, we believe 2024 could see a further broadening-out to the benefit of a wider basket of stocks. Some potential for volatility remains, however, and having a bias to quality remains important to mitigate against unexpected outcomes.
To learn more about our US SMID strategy, visit our capabilities page.
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1 There is a wrinkle in the numbers. Due to a combination of franchise moves, league expansion, and conference shifts, the goals of the Super Bowl Indicator have moved somewhat in recent years with an increasingly large question mark about what constitutes the dividing line between AFL teams and NFL teams (not least the Pittsburgh Steelers).
