Super Bowl Sunday is just a few weeks away. Right after the big game, you'll learn more about the Super Bowl indicator. This indicator predicts the stock market trend for the remainder of 2018.
The football final does not seem relevant to the stock market. But before you decide to ignore this indicator, you should know that there is a reason why the indicator is working. And since he Is work, it means we can even use the stock market to predict the outcome of the game.
The Super Bowl indicator is simple. If a former 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, expect a declining year.
The economy is why it works.
Old vs new
The NFL dates back to 1920. Its early teams included the Chicago Bears, Pittsburgh Steelers, and Cleveland Browns. These are Rust Belt towns that were booming in 1920. Manufacturers built these towns.
AFL played its first games in 1960. Its teams were in booming cities that represented the new economy. Oakland was a technology hub and home to the Raiders. Boston's East Coast tech hub became the home of the Patriots in the new league.
The Super Bowl indicator works for a reason
This indicator was correct 75% of the time over the past 51 years.
There is a logical explanation for this record.
When the old economy is doing well, fans of these old NFL towns have good jobs. They buy high priced tickets and provide the money to recruit great players who can bring a victory.
If the new economy is doing better, teams in these cities welcome the 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 manufacturing economy is boosting the old NFL and Dow teams.
Stocks can predict the match
The Super Bowl Meter isn't the only tool to watch out for around the start of the year. The January first five days indicator shows that if the Dow Jones rises in the first five days of the year, the index closes higher about 83% of the time.
By combining the two ideas, we can predict the winner based on the first five days of January. The record here is better than flipping a coin. The first five days correctly called the Super Bowl 61% of the time.
This year the first five days were over. This tells us to expect a former NFL team to win the Super Bowl.
Right now, bettors are favoring the Minnesota Vikings and New England Patriots to meet in the Super Bowl. If they're right, and that's the game, the Vikings are the favorites based on the first five days.