by Gary Alexander

January 25, 2022

It was Morning in America on this date in 1981 when 52 Americans held hostage by Iran for 444 days arrived back on American soil. It was only five days after Ronald Reagan was sworn in as President.

On the same Super Bowl Sunday, January 25, 1981, Mao Zedong’s widow, Jiang Qing, architect of the decade-long Cultural Revolution nightmare, was sentenced to death (later commuted to life); but investors had their eyes glued on Super Bowl XV, in which the Oakland Raiders beat the Philadelphia Eagles, the first time a “wild card” team ever won the Super Bowl. It was also a sign that the market would fall in 1981 – and it did – for that was the highly-touted “Super Bowl Indicator,” introduced with great fanfare in a 1978 article in The Sporting News written by New York Times sports columnist, Leonard Koppett.

Put simply, if an AFC team wins, the market will fall, but if an old-line NFC team wins, stocks will rise.

Koppett wrote the article in jest, mocking both the arcane world of sports statistics – which was starting to dominate The Sporting News and sports in general – plus the retrofitting of stock market indicators, like skirt lengths or movie themes or music hits or Triple Crown winners. But then a crazy thing happened.

The darn indicator kept working. We entered the strongest bull market of the 20th century in 1982 and the NFC won 15 of 16 Super Bowls from 1982 to 1997. The only time the AFC won in that long stretch was on January 22, 1984, when the L.A. Raiders beat Washington and this iconic Super Bowl ad was aired.

Super Bowl Ad Images

Less than a week before Super Bowl 18, one week before the Apple Macintosh was due in computer stores around the nation, Apple McWrite software crashed the morning the McIntosh was to be shipped. Apple execs tried to pull the ad (without success). It ran once, in the third quarter, and created history.

In the ad, IBM was seen as Big Brother with Apple as the supple young athlete. Today, Apple, at $2.7 trillion market cap is 25 times bigger than Big Blue – so who is Big Brother now?! Adjusted for splits, IBM has grown 5-fold since then and Apple ballooned 1,900-fold, but McWrite kept bombing on me:

Macintosh Computer Images

Things went swimmingly for the Super Bowl Indicator in 30 of 31 years until Super Bowl 32 (pardon my lack of Roman Numerals) until John Elway’s once snake-bitten Denver Broncos (an AFC team which had previously lost four Super Bowls) beat the once-invincible Green Bay Packers, the most storied of old-line NFC franchises. Denver also won in 1999, but the stock market soared by over 20% both years.

Then, in 2000, the NFC St. Louis Rams won, and the market fell. In 2001, the Baltimore Ravens (an old-line NFL team) won, and the market kept on falling. In 2008, the NFC New York Giants won the Super Bowl in the worst market year since the 1930s. What gives? Is the NFL disrespecting market history?

No. This is just reversion to the mean. If a coin comes up heads 30 of 31 times, what are the chances it will come up heads the next time?  50% is the correct answer, but some will bet on the trend (heads) and others will say, “Tails are due.” A huge industry (gambling) is built by casinos filled with trend-followers and contrarians, and the casinos are delighted to feed the delusions of both sides in this futile civil war.

The key to the Super Bowl delusion is that the stock market goes up more than it goes down, and old-line NFL teams win more often than the AFC upstarts. Since Super Bowl #1 in 1967, the market has risen in 40 of 55 years, and in those first 55 Super Bowls, old-line NFL teams won 38 times, so there is bound to be lots of overlap. Of the six teams that have won four or more Super Bowls, five are old-line NFL teams.

The “January Barometer” Has Also Bombed Out Lately

So far, January 2022 stocks are way down, so investors are worried that the whole year will be down. The S&P is down 7.73% through last Friday, while NASDAQ is off 12% and the Russell 2000 is off 11.5%. There is no conceivable way all these indexes can rally into positive territory by Monday, January 31.

The January Barometer, devised by Yale Hirsch in 1982, states that “as the S&P goes in January, so goes the year.” According to the 2010 edition of Hirsch’s Stock Trader’s Almanac, the January Barometer had registered only five major errors from 1950 to 2008 for a “91.5% accuracy rate.”  (I’m quoting the 2010 edition since that’s when the January Barometer started to flounder. In 2009 and 2010, the market fell in January, but the full years rose by double digits. Then, in 2011, January was up, but the year was flat.)

January has usually been a positive month from 1950 to 2000, but it has been in a slump since then. You might be surprised to hear that January has been down 11 of the last 20 years, and this has tended to put a damper on the January Barometer, since the market tends to rise most years, historically. (There have been only five of the last 30 years that the S&P 500 has declined over 1%, three were consecutive, 2000-2002.) As a result, the January Barometer has been about 50-50 since 2001. Here is the record since 2001:

Standard & Poor's 500 Performance Table

As you can see from this table, in the 21 calendar years since the dawn of the new Millennium, the January Barometer has worked 10 times and failed 10 times (2011 is a draw). This is really a failure because – just like the Super Bowl Indicator – it should work more than 50% of the time, because the market goes up more months (and years) than not, so it should correlate at least six out of 10 times.

Here are some typical charts of recent reversals of the January Barometer from both extremes:

Standard & Poor's Index in 2016 Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The main reason why these two historical theories worked for a time, then didn’t, is that retrofit theories are manufactured to fit historical data, but the future is more random. You can apply this lesson to the length of bull markets, length of recoveries, the trading range of stocks, and many other market variables.

Navellier & Associates owns Apple Computer (AAPL) but does not own International Business Machine (IBM) in managed accounts. Gary Alexander does not personally own Apple Computer (AAPL) or International Business Machine (IBM).

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

Please see important disclosures below.

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Bitcoin’s Major Topping Pattern is Now Complete

Sector Spotlight by Jason Bodner
Welcome to “Taper Tantrum 2.0”

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Read Past Issues Here

About The Author

Gary Alexander
SENIOR EDITOR

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

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