It is the opposite of sound investment advice: Buy stocks if a given team wins the Super Bowl, and sell if the other team takes it. But the so-called Super Bowl indicator merits attention from investors not because it is wise, but because of the precise reason why it is stupid.
Likely coined in 1978 by The New York Times' Leonard Koppett, the idea is that stocks tend to rise in years when a member of the old National Football League wins the big game and fall when an old American Football League team wins. The would mean a Denver Broncos' victory over the Carolina Panthers on Sunday would be bearish.
The indicator has enjoyed an impressive record of correctly calling the market but has been roundly critiqued by many, including Koppett, for being an absurd way to invest — since there is obviously no rational connection between a football game and stock performance.
However, changing your allocation because of where a ball lands is not the only bad way to choose where to put your money. Wall Street is full of terrible ideas, and for a very good reason: There is a desire for them.
Like most things in life, there is a great deal of unpredictability in stock market returns. However, unlike the outcome of a horse race, the resting place of a roulette ball or the attractiveness of the passenger sitting next to you on a plane, the market's performance in a given year has profound importance for many individuals, not to mention for the global economy. This makes its unpredictability even more maddening, and the possibility that it could become predictable even more tantalizing.
Seen in this light, the "Super Bowl indicator" is not a harmless morsel of market trivia, but actually a cruel joke. Are you five years away from retirement, and trying to decide whether to keep the bulk of your money in stocks in an attempt to make up for lost time, or are you going for the safety of bonds and resigning yourself to meager gains and a downgrade in lifestyle? The decision is easy: Just watch the Super Bowl! Ha, ha.
The risk of investors taking the Super Bowl indicator seriously is likely low. However, other market timing strategies can appear more legitimate. For instance, some judge how good the year will be by seeing how good January was, a technique known as the "January barometer." This looks like an effective way to call the market, too – until one remembers that since stocks tend to rise over time, the market tends to rise in both January and in the full year. And never mind that once the calendar page turns, 8.3 percent of the year is already in the rear-view mirror.