Tuesday, February 01, 2000
Rams win may spur on bulls
Super Bowl 'indicator' of stocks
BY AMY HIGGINS
The Cincinnati Enquirer
Mike Jones probably wasn't thinking about the stock market when he stopped Kevin Dyson on the 1-yard line, assuring the St. Louis Rams their Super Bowl victory Sunday.
But according to the statistics — and judging from Monday's 202-point gain in the Dow Jones Industrial Average — he also might have assured another bullish year on Wall Street.
It's called the Super Bowl indicator: When an old National Football League team wins, the market advances. When an old American Football League team wins, the market declines.
The Super Bowl indicator has been successful in 27 of its 33 years — an accuracy rate of 82 percent that many market forecasters would be proud of.
“No one can argue that the Super Bowl indicator, as silly as it sounds, its track record is pretty good,” said Jerry Wang, market strategist at Schaeffer's Investment Research in Forest Park.
Coincidence, you say? Perhaps. It could be that the market's strength and the dominance of the National Football Conference (to which most of the original NFL teams belong) are two unrelated events, making any correlation a coincidence.
But what might not be a coincidence is the January indicator. This is the correlation that says that the market's direction in January foretells its direction for the year.
And if this is true, then Wall Street's bull might be losing speed — despite Mr. Jones' best efforts. For the first time in eight years, all of the broad stock market indexes fell in January.
The Dow Jones industrials, the most closely watched index, ended January at 10,940.53, down almost 5 percent from December's close. The broader Standard & Poor's 500 Index, favored by most Wall Street professionals, fell about 5 percent in January, and the technology-heavy Nasdaq Composite Index slipped slightly more than 3 percent for the month.
Mr. Wang said the January effect often happens because the perform ance of one month can determine the outcome for the whole year. There is less of a chance that 11 months' performance can overcome a decline in one month, he said.
The January indicator also has been right 27 of the last 33 years. Two of the six times that the Dow has fallen — including 1990, when the Dow fell 5.9 percent in January and ended the year down 4.3 percent — the market rebounded, but not enough to fully recover and end the year up.
“The stock market is of the nature where one month can affect the whole year,” Mr. Wang said.
Pete Sorrentino, director of equity research at Bartlett & Co., said the January indicator is losing some of its weight because the market is broadening. Money might be moving out of the 30 large stocks tracked by the Dow and into smaller stocks, bringing gains to that sector.
Dan Torbeck, a financial adviser with downtown's Fitzgerald Lame Torbeck Group/J.C. Bradford & Co., still believes some in the January indicator, mostly because factors holding down stock prices last month are not likely to go away.
“It's the uncertainty surrounding inflation and interest rates,” he said. “I don't foresee that going away anytime soon.”
Besides the Super Bowl indicator and the January indicator, Mr. Torbeck said there's also the mini-skirt indicator. That one says that when hemlines go short, stock prices go down.
Somebody should tell Ally McBeal.
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