Super Bowl Indicators?

Get ready for a week where your football sensory goes into overload; as show after show has their location in Atlanta bringing you live feed from the “Big Game”; office pools will require you to pick numbers of the final score; and, where next Sunday’s pre-game shows will be longer than the actual football game itself. It is a good week for Amazon Video, Netflix, etc., or, in my case, the Encore Western Channel.

Which Super Bowl winner historically may mean a better stock market future; the Pats (AFC) or Rams (NFC)? Historically, the S&P 500 has done better when a team from the NFC wins the Super Bowl. This fun (but totally spurious) correlation is known as the “Super Bowl Indicator”. Looking at the past 52 Super Bowls it is found that when the NFC wins, the S&P 500 gains 10.2% for the year versus 5.8% when the AFC wins. Lastly, when the Patriots are involved bulls usually aren't happy - as the average return for the S&P 500 is only 2.2% the nine times they've been in the big game (and actually worst under Tom Brady). Go Rams! Beat Pats!

A more formal indicator of future economic growth/recessions is The Conference Board's Leading Economic Index (LEI). The LEI points to low recession odds, which is based on a composite of 10 economic indicators (like manufacturers' new orders, stock prices, and weekly unemployment claims), and grew 4.3% year over year in December. While LEI growth has tapered off recently, the index has risen year over year for 109 straight months, a sign to us that recessionary odds are low. Since 1970, the LEI has turned negative before every economic recession, and is utilized in our forward planning because of its solid predictive ability. Good growth, little upside. With 112 S&P 500 companies having reported results, fourth quarter earnings growth for the S&P 500 Index is tracking to a 14.3% year-over-year increase, 1.5% below expectations as of January 1, 2019 on beat rates slightly below recent trends. S&P 500 earnings estimates for the next 12 months have been reduced by 2.1% year to date and may fall further amid slower economic growth, trade tensions, and the government shutdown. Although the lack of upside is a bit disappointing, barely 20% of results are in (mostly financials), the drop in estimates is in line with long-term averages, and growth expectations for 2019 in the 6% range are achievable in the view of LPL Financial.

Having grown up living between Minneapolis/Chicago I have seen my share of very cold winter days. Playing hockey for days on the frozen ponds of Minneapolis, and on the Chicago Des Plaines river when the local park district outside rink was not available…putting life and limb at risk by chasing pucks to the very brink of where the river was not frozen…just to save the puck so we could continue playing hockey. It is amazing the level of cold you can handle when you are doing something you love. Today my brother lives in Thief River Falls, MN. A town of 8500+/- hearty souls living about an hour and one-half south of the Canadian border. Over the weekend this hamlet was under a Winter Weather Advisory where the wind chills could have reached a low of -65 degrees! It has warmed up today, currently -5, with a low of -26 (not including wind chill), leaving me to question the judgement of anyone over the age of 40 to live there in the winter…As I hung up the skates many years ago, give me a winter week in the 30-50 degree range in Virginia anytime (or, 70-80’s in Florida!).

James A. Pavik Sr. may be reached at 804.725.3740 or james.pavik@pavikwealth.com.

ChFEBC™ Chartered Federal Employee Benefits Consultant

Follow me on Twitter: @PavikWealth

Securities and Advisory services Offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.