NEW YORK (CNNMoney.com) -- Investors who want stocks to have a good year should be cheering against the team that plays in Wall Street's backyard.
If the New York Jets lose to the Indianapolis Colts on Sunday, it would "guarantee" a good year for stocks, according to a fanciful bit of lore known as the Super Bowl stock indicator.
Here's how it works. If a team that had its roots in the National Football League wins, the Dow Jones industrial average should go up. If a team from the upstart American Football League, which merged with the NFL shortly after the AFL Jets upset the then NFL Baltimore Colts in Super Bowl III, stocks should go down.
In the 43 years the Super Bowl has been played, it has been correct 81% of the time, calling for a drop in stocks nine times and market rallies 23 times.
That includes last year's game, when the win by the Pittsburgh Steelers correctly predicted the rebound in stocks before many investing professionals were willing to go out on that limb.
The two NFC teams playing this Sunday -- the Minnesota Vikings and the New Orleans Saints -- both have NFL roots. So as long as the Jets don't win the Super Bowl, it should be another great year for stocks, right?
Well, basing investment decisions on the outcome of a game makes as much sense as playing football without a helmet. But whether it is due to cosmic forces or merely coincidence, the indicator has a surprisingly good track record.
According to a study by George Kester, a business professor at Washington & Lee University in Lexington, Va., an investment strategy driven by the Super Bowl results, in which investors moved into Treasury bonds following wins by former AFL teams and back into stocks following victories by teams from the old NFL, would have performed more than twice as well as a buy-and-hold investment in an S&P 500 index fund over the same period.
Kester said while he doesn't believe the indicator is a wise way to make investment decisions, the better return on the Super Bowl-driven fund was "a result that would be the envy of many portfolio managers."
Of course, the Super Bowl indicator has been wrong eight times, often spectacularly wrong.
The New York Giants' upset win in 2008 over the New England Patriots was supposed to bring about a bull run for stocks. Instead the Dow crashed 33.8% that year as the credit markets and banking sector imploded.
Similarly, the back-to-back wins by the Denver Broncos, formerly of the AFL, in 1998 and 1999 did little to slow the rising bubble in tech stocks. The market didn't cool off until 2000 -- after the St. Louis Rams, a team with its origin in the NFL, won the Super Bowl.
|Overnight Avg Rate||Latest||Change||Last Week|
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