The Pittsburgh Steelers should bring back cheer to Wall Street. For many years investors have tracked the outcome of the Super Bowl as a strong indication of whether the market would go up or down for the year. Despite the silliness of the linkage, it has proven a more reliable indicator than most expert predictors. Over the years, the indicator works about 80 percent of the time. Chance alone would mean it should work only half of the time.
The indicator holds that when a team from the National Conference or an original NFL team is the winner, the market will go up. If an old AFL team wins, the market will go down. Views differ on how to treat expansion teams that have joined the league since the AFL and NFL merged in 1970.
Both the Arizona Cardinals and the Pittsburgh Steelers should lead the market up this year and we certainly could use that after the worst calendar decline in more than 70 years. The Steelers seventh appearance in the big game augurs even better. After their six previous appearances, the Dow has always risen.
This is the first appearance in the Super Bowl for the Cardinals so they are an unknown for the stock market. However, their status as the NFC representative is a good omen.
The Steelers have won five previous Super Bowls tying them with the San Francisco 49ers and the Dallas Cowboys for the most championships in modern football history. If the Steelers win this Super Bowl -- and they are favored -- they would stand alone as the most successful NFL franchise.
Along with that record of on field performance, they have a chance to be the best talisman for the stock market. In five appearances in the Super Bowl, the 49ers were victors each time and the Dow rose an average of 20.7 percent but there was one losing year for the market, 1990. The Cowboys have made a record eight appearances in the game and the Dow has risen 10.2 percent per year, slightly below the long-term average, and there was also a losing market year in 1978.
The Steelers alone have never ushered in a losing year in the Dow and their long-term average return is 19.6 percent. If the market rises 27 percent this year they will eclipse the 49ers in every market related way. While that would require a big rally, last year's 34 percent drop was one of the biggest in market history. A 27 percent rally would only bring the Dow to 11,146, the closing level in mid-September 2008.
New York Giant fans may be disappointed that they did not repeat their trip to the Super Bowl but market participants should be relieved. Their victory last year should have led to an up year and instead the big drop was one of the biggest dents so far in the indicator. In four trips to the Super Bowl, the Giants have left behind disappoint markets, averaging a drop of nearly five percent.
While all of this may seem overly whimsical in the midst of a serious financial crisis, most American market participants do take their pro football seriously. And while there is no reason to assign any cause and effect to the Super Bowl Indicator, people move billions of dollars every day on flimsier evidence than this. In any case, all investors would be well served by joining the legions of Steeler fans around the country in a hearty chorus of Go Steelers.