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By day, I'm a mild-mannered financial journalist and intermittent newsletter writer. By night, I'm a rabid Philadelphia sports fan.
So naturally, with my beloved Phillies making their first playoff appearance since 2011, several people in my contacts sent me the following tidbit from the Morning Brew: "Over the past 100 years the surest sign of an economic downturn has been a Philly-based baseball team winning the World Series. It happened in 1929, 1930, 1980, and 2008."
As a fan of the losingest team in the history of American professional sports, the instinct is to catastrophize: Either the Fightins or financial markets are bound to fall apart!
But here's where the finance writer thing comes in handy. For one thing, the Global Financial Crisis and associated bear market began in 2007, not 2008. But even if the assertion is that Philly World Series and financial downturns go hand-in-hand, it's worth remembering that a million of these sorts of silly indicators and truisms have floated around among market watchers for decades — and they rarely mean anything.
Market 'indicators' that don't indicate much of anything
Ever heard of the hemline index? This market theory suggests that shorter skirt styles come into fashion during eras of economic prosperity (think 1920s flapper dresses and '80s miniskirts) and that women's fashion gets more modest in advance of economic downturns.
While there is certainly some correlation there, it is far from a causal relationship. As a recent analysis by InStyle put it: "Instead, many different factors — the economy, politics, pandemic outbreaks, and social movements — have affected which aesthetics consumers respond to."
Or what about the so-called January barometer? "As goes January, so goes the year," according to an old market saw, with positive months presaging good years in the market and negative ones indicating downturns.
This may look prescient this year given how things have gone after a down January. But 2020 and 2021 — both huge years in the stock market — started with negative January returns. Overall, analysts at Fidelity found that the rule tends to work better in up Januarys than down ones, which makes sense. The U.S. stock market, after all, has historically tended to go up.
Returning to sports, consider the Super Bowl indicator, which posits that the market tends to perform better when an NFC team wins the big game rather than an AFC team. But the NFC champion Rams won this year and the market has still gone down.
By this logic, a Super Bowl victory for the NFC-winning New York Giants in February 2008 should have meant a good year for stocks. Instead, markets continued to slide. Perhaps in anticipation of a Phillies championship in October.
While economists and investors alike have some fun finding these correlations, they have virtually no impact on how the economy or the stock market will actually behave when compared with tangible factors such as inflation, interest rates, consumer spending and corporate earnings.
In other words, if the economy tanks, it won't be because the Phillies won it all. And if the Phillies do, in fact, fail to go all the way, well, there's always the Eagles.
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