The Super Bowl Indicator and Stocks


Are you making your Tremendous Bowl plans now? Whereas the clock is operating down till sport time, market historians remind us that the winner of the Tremendous Bowl might supply clues 50 yard line on football field on how the inventory market will carry out in 2022.

Actually?

New York Instances sportswriter Leonard Koppett developed the Tremendous Bowl Indicator again in 1978. Whereas at first this was a cheeky little idea, it has surprisingly proven tooth over the previous 44 years, with a reasonably spectacular accuracy charge. What is that this rule? Huddle up.

The Tremendous Bowl Indicator states that the Dow Jones Industrial Common will shut out the yr with a optimistic return if the staff from the Nationwide Soccer Convention (NFC) – or one with unique NFC roots – wins the Tremendous Bowl. On the flip facet, this indicator warns that the DJIA will report losses at year-end if the American Soccer Convention (AFC) staff wins the massive sport.

Trying again all through historical past, from 1967-2015, the Tremendous Bowl indicator reveals an accuracy charge of 82%. That’s, certainly, higher than a coin flip.

Whereas this can be a enjoyable statistic, Wall Avenue consultants clarify there is no such thing as a actual connection between who wins the Tremendous Bowl and inventory market efficiency.

On the crux of the matter is an easy rule: correlation doesn’t equal causation.

Sorry to disappoint, however the Tremendous Bowl Indicator’s previous efficiency is just a coincidence. Certainly, if the inventory market ends the yr with a loss and the Cincinnati Bengals take house the trophy on Sunday, it will be pure coincidence.

For you, as an investor, it’s correlation that actually issues. And, in diversification – non-correlated property – like bodily gold – are a method you may shield your blind facet.

Gold’s lack of correlation to different property is considered one of its strengths in your portfolio. No- or low-correlation means, for instance, that when shares crash, gold sometimes climbs.

For optimum risk-adjusted efficiency, the normal 60% shares – 40% bond portfolio ought to be set as a substitute at 60% shares, 5% bonds and 35% gold, in accordance with GraniteShares’ analysis. Annualized portfolio returns elevated when gold was added to the portfolio.

Final month’s January inventory market losses revealed how susceptible equities are to getting sacked.

It might be time to bolster your defensive package deal. It’s nonetheless the primary down of the yr in relation to your portfolio. There’s nonetheless time to spherical out your bench with diversification that’s statistically important – like growing your allocation to bodily gold.

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