Sunday Super Bowl is just a few weeks away. Right after the big game, you will read about the Super Bowl indicator. This indicator predicts the stock market trend for the rest of 2018.
The football final seems irrelevant to the stock market. But before you decide to ignore this indicator, you should know that there is a reason that the indicator works. And since then does work, this means that we can also use the stock market to predict the outcome of the game.
The Super Bowl indicator is simple. If an Old National Football League (NFL) team wins, expect the Dow Jones Industrial Average to close for the year. If a new American Football League (AFL) team wins, wait a year below.
Economics explains why this works.
Old vs New
The NFL dates back to 1920. Her first teams included the Chicago Bears, Pittsburgh Steelers and Cleveland Browns. These are cities of the Rust Belt that flourished in 1920. Manufacturers built those cities.
The AFL played its first games in 1960. Its teams were in booming cities representing the young economy. Oakland was a technology hub and home to the Raiders. The East Coast technology center Boston became the home of the Patriots in the new league.
The Super Bowl indicator works for a reason
This indicator was accurate 75% of the time in the last 51 years.
There is a logical explanation for this historical record.
When the old economy does well, fans in those old NFL cities have good jobs. They buy high priced tickets and provide the money needed to sign great players who can bring a win.
If the new economy is doing better, teams in those cities are home to 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 productive economy boosts the old NFL and Dow teams.
Shares can predict the game
The Super Bowl indicator is not the only tool to be seen near the beginning of the year. The indicator of the first five days of January shows that if the Dow rises during the first five days of the year, the index closes above about 83% of the time.
Combining the two ideas, we can predict the winner based on the first five days of January. The history record here is better than tossing a coin. The first five days correctly called the Super Bowl 61% of the time.
This year, the first five days were over. That tells us to expect an old NFL team to win the Super Bowl.
For now, the odds makers favor the Minnesota Vietnam and New England Patriots to meet in the Super Bowl. If they are correct, and this is the match, the Vikings are the favorites based on the First Five Days.