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What does the Big Game 🏈 have to do with the stock market?

What does the Big Game 🏈 have to do with the stock market?

December 20, 2023

It's a fun time of year for football fans. The National Football League (NFL) playoffs are starting, and the Big Game is approaching. While most fans will tune in for the matchups, commercials, and Usher’s halftime show, a segment of viewers will be watching the game to glean insight into the potential direction of the financial markets. These investors subscribe to a belief in the “Big Game Indicator.”

We thought it would be interesting to explore this and other out-of-the-box pseudo indicators. Remember that these theories may not materialize based on the game’s outcome, and any investments should be consistent with your objectives, timeframe, and risk tolerance.

What is the Big Game Indicator?

The NFL has been around since 1920. In 1960, the rival American Football League (AFL) was formed. After ten years of competing for fans, the two leagues merged under the NFL moniker in 1970.1

The Big Game Indicator is the theory that if a pre-merger NFL team wins, that can be a positive for the stock market, as measured by the Standard & Poor’s 500 Composite Index. However, if a former AFL team takes the Lombardi Trophy, that may foreshadow bearish conditions ahead.2

Although nonscientific, this indicator has endured for decades among those who believe that big game outcomes are eerily aligned with market moves. Rather than earnings, rates, and risks, these people might look to the results from Allegiant Stadium on February 11 as a predictive barometer.

Where did the Big Game Indicator come from?

The Big Game Indicator was introduced in 1978 by Leonard Koppett, a sportswriter for The New York Times. As prescient as it was up to that point, Koppett’s indicator included one major caveat that helped his odds. He placed the Pittsburgh Steelers, a team with an NFL-leading six Big Game wins in all, in the NFC because that’s where the team started back in 1933. In other words, Koppett considered the Steelers an original NFL franchise, even though it won all its Big Games as part of the AFC.3

How has the Big Game Indicator done at predicting stock market returns?

The Big Game Indicator results have had a slightly better-than-average track record. Since its introduction in 1978, the indicator has been correct in 41 out of 56 games. That’s over 70% of the time.3

As the chart below indicates, Koppett’s theory has not had such a stellar record since 2008. The Big Game couldn’t predict significant events such as the Great Recession or the COVID-19 pandemic. The old maxim applies: Correlation does not imply causation.

Besides the Big Game, there are other quirky indicators that some have followed over the years.

The Cardboard Box Indicator

The Cardboard Box Indicator points to the strength of the economy and is based on the fact that almost everything is shipped in a cardboard box. High demand for cardboard boxes means more economic activity is happening – think of all those Amazon boxes outside your door. Less demand for cardboard indicates a less robust economy. Famed Federal Reserve Chairman Alan Greenspan may have glanced at this indicator to gain insight into manufacturing performance. In 2008, at the height of the recession, the revenue of cardboard box manufacturers averaged a 50% drop.4

The Big Mac Index

The Big Mac Index compares the cost of a McDonald’s Big Mac in over 50 countries. It’s based on the premise that the same item should cost essentially the same everywhere. As a result, if you compare the price of a Big Mac using exchange rates, you can tell if a country’s currency is overvalued or undervalued. The Economist first developed the Big Mac Index in 1986 and maintained an interactive index on its website, making this a legitimate financial measure.4

As financial professionals, we are here to help our clients build portfolio strategies based on their goals, time horizons, and risk tolerance. We focus on creating a sound financial approach and avoid being influenced by superstitious theories.

Our job is to create roadmaps to help our clients pursue their short- and long-term objectives. So enjoy the big game, but avoid reading anything into the final score!

Good luck to your favorite team!

1. Britannica.com, October 28, 2023
2. The Chicago Financial Planner, February 7, 2023
3. Investopedia, February 7, 2023
4. The College Investor June 19, 2023