Could Super Bowl LVII Flummox Your 401(k)?

Will your 401(k) be chipped by the Chiefs—or soar with the Eagles?

That’s what adherents of the so-called Super Bowl Indicator[1] would likely conclude, after all. It’s a “theory” that when a team from the old National Football League wins the Super Bowl, the S&P 500 will rise, and when a team from the old American Football League prevails, stock prices will fall.

It’s a “theory” that has been found to be correct nearly 80% of the time—for 41 of the 56 Super Bowls, in fact. Not that it hasn’t had its shortcomings.

One need to look back no further than last year’s victory by the Los Angeles Rams that should have been a portent of good times, only to see the S&P 500 slump more than 19% for its biggest loss since 2008.  And while the previous year’s victory by the NFC’s Tampa Bay Buccaneers bolstered the premise behind the “theory,” the year before that the win by the AFC’s (and original AFL) Kansas City Chiefs over the then-NFC Champion San Francisco 49ers undermined its track record (or did your 401(k) miss that 18.4% rise in the S&P 500?). Or how about the year before that when the AFC’s New England Patriots (who once upon a time were the AFL’s Boston Patriots) bested the NFC champion Los Angeles Rams—but the S&P 500 was up more than 30% that year (2019).

Or, looking the other way, the year before that a win by the NFC champion Philadelphia Eagles (back for this year’s contest) against the AFC Champion Patriots turned out to be a loser, marketwise, with the S&P 500 down more than 6% (though for most of the year it was quite a different story). Ditto the year before, when the epic comeback by those same AFC Champion Patriots against the then-NFC champion Atlanta Falcons failed to forestall a 2017 market surge.

Now, one might think that the real “spoiler” to this market “theory” is the New England Patriots—but the year before that, the AFC’s (and original AFL) Broncos’ 24-10 victory over the Carolina Panthers, who represented the NFC, also proved to be an “exception.”

Market Makings

You might well wonder why, in view of that consistent string of “exceptions” that we’re still talking about this “theory”—but, as it turns out, that’s an unusual (albeit consistent) break in the streak that was sustained in 2015 following Super Bowl XLIX, when the AFC’s New England Patriots (yes, they show up a lot) bested the Seattle Seahawks 28-24 to earn their fourth Super Bowl title.

It also “worked” in 2014, when the Seahawks bumped off the legacy AFL Denver Broncos, and in 2013, when a dramatic fourth-quarter comeback rescued a victory by the Baltimore Ravens—who, though representing the AFC, are technically a legacy NFL team via their Cleveland Browns roots (this is where things start to get confusing, as the Ravens, who were the Browns moved to Baltimore in 1995 (though the NFL still views them as an expansion team) filling the hole left by the then-Baltimore Colts’ 1984 “dead of night” move to Indianapolis.

Admittedly, the fact that the markets fared well in 2013 was hardly a true test of the Super Bowl Theory since, as it turned out, both teams in Super Bowl XLVII—the Ravens and the San Francisco 49ers—were, technically, NFL legacy teams.

However, consider that in 2012 a team from the old NFL (the New York Giants) took on—and took down—one from the old AFL (the New England Patriots—yes, those New England Patriots… again). And, in fact, 2012 was a pretty good year for stocks.

Steel ‘Curtains’?

On the other hand, the year before that, the Pittsburgh Steelers (representing the American Football Conference) took on the National Football Conference’s Green Bay Packers—two teams that had some of the oldest, deepest and, yes, most “storied” NFL roots, with the Steelers formed in 1933 (as the Pittsburgh Pirates) and the Packers founded in 1919. According to the Super Bowl Theory, 2011 should have been a good year for stocks (because, regardless of who won, a legacy NFL team would prevail).

But as some may recall, while the Dow gained ground for the year, the S&P 500 was, well, flat (dare we say “deflated”?).

And then there was the string of Super Bowls where the contests were all between legacy NFL teams (thus, no matter who won, the markets should have risen):

• 2006, when the Steelers bested the Seattle Seahawks;
• 2007, when the Indianapolis Colts (those old Baltimore Colts) beat the Chicago Bears 29-17;
• 2009, when the Pittsburgh Steelers took on the Arizona Cardinals (who had once been the NFL’s St. Louis Cardinals); and
• 2010, when the New Orleans Saints bested the Indianapolis Colts, who, as we’ve already remarked, had roots dating back to the NFL legacy Baltimore Colts.

Sure enough, the markets were higher in each of those years.

As for 2008? Well, that was the year that the NFC’s New York Giants upended the hopes of the AFL-legacy Patriots (yes, those Patriots) for a perfect season, but it didn’t do any favors for the stock market. In fact, that was the last time that the Super Bowl Theory didn’t “work” (well, until the year before last—oh, and the year before that—and the year before…).

Patriot Gains

Times were better for Patriots fans in 2005, when they bested the NFC’s Philadelphia Eagles 24-21 (yep, those Eagles). Indeed, according to the Super Bowl Theory, the markets should have been down that year—but the S&P 500 rose 2.55%.

Of course, Super Bowl Theory proponents would tell you that the 2002 win by the New England Patriots accurately foretold the continuation of the bear market into a third year (at the time, the first accurate result in five years). But the Patriots’ 2004 Super Bowl win against the Carolina Panthers (the one that probably nobody except Patriots fans and disappointed Panthers advocates remember because it was overshadowed by the infamous “wardrobe malfunction”) failed to anticipate a fall rally that helped push the S&P 500 to a near 9% gain that year, sacking the indicator for another loss (couldn’t resist).

Bronco ‘Busters’

Consider also that, despite victories by the AFL-legacy Denver Broncos in 1998 and 1999, the S&P 500 continued its winning ways, while victories by the NFL-legacy St. Louis (by way of Los Angeles) Rams (that have since returned to the City of Angels) and the Baltimore Ravens (those former “Browns”) did nothing to dispel the bear markets of 2000 and 2001, respectively.

In fact, the Super Bowl Theory “worked” 28 times between 1967 and 1997, then went 0-4 between 1998 and 2001, only to get back on track from 2002 on (though “purists” still dispute how to interpret Tampa Bay’s 2003 victory, since the Buccaneers spent their first NFL season in the AFC before moving to the NFC).

Indeed, the Buccaneers’ move to the NFC was part of a swap with the Seattle Seahawks, who did, in fact, enter the NFL as an NFC team in 1976 but shuttled quickly over to the AFC (where they remained through 2001) before returning to the NFC.[2] And, not having entered the league until 1976, regardless of when they began, can the Seahawks truly be considered a “legacy” NFL squad?

Bear in mind as well, that in 2006, when the Seahawks made their first Super Bowl appearance—and lost—the S&P 500 gained nearly 16%.

As noted above, the Eagles have played in three Super Bowls—but only won once—defeating Tom Brady and the New England Patriots 41-33 in Super Bowl LII in 2017 (they previously lost to the Oakland Raiders in Super Bowl XV and to the Patriots in Super Bowl XXXIX). But those outcomes haven’t really lined up with what the Super Bowl Theory suggests. 

As for the Chiefs, they’ve been there before—four times—but with long stretches in between and mixed results. They were in the very first (though back then it was called the AFL-NFL World Championship Game), losing to the Green Bay Packers, but made it back to Super Bowl IV, where they beat the Minnesota Vikings (the first of the four Super Bowls that team would lose). And then, it was a long 50-year stretch between then and 2020 when they bested the 49ers 31-20—only to come back the next year (2021)—and lose to Tom Brady and the Tampa Bay Buccaneers in Super Bowl LV. Again, a mixed contribution to the SB Theory.

The Eagles are the designated “home” team—and given that the game is taking place in an NFC Stadium, so this doesn’t come as a surprise. That said, they’re going to be wearing their home green jerseys—and the Chiefs will be wearing white—and the team wearing white jerseys in the Super Bowl has won 15 of the last 18 Super Bowls (though the last time Kansas City won they were wearing red).

One more thing to watch for those of you into such things; the winner of the coin toss has lost the Super Bowl eight straight years. In fact, the last team to win the coin toss and win the game—was the Seahawks against the Broncos in Super Bowl XLVIII. Yeah, it’s been a while.

Finally—if you’re feeling like the Super Bowl is later and later, you’re not imagining things. In fact, this year’s contest is the SECOND latest ever. The latest? Last year’s contest between the Rams and the Bengals.

All in all, and particularly in view of the exciting playoff games that have led up to it, it looks like it should be a good game.

And that—whether you are a proponent of the Super Bowl Theory or not—would be one in which regardless of which team wins, we all do!

- Nevin E. Adams, JD

 

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[1] An alternate theory linking the Super Bowl to stock market performance in reverse fashion postulates that Wall Street’s results can be used to predict the outcome of the game. According to this theory, if the Dow rises from the end of November until Super Bowl game day, the team whose full name appears later in the alphabet will win. Some people have too much time on their hands….

[2] Note: Seattle is the only team to have played in both the AFC and NFC Championship Games, having relocated from the AFC to the NFC during league realignment prior to the 2002 season. The Seahawks are the only NFL team to switch conferences twice in the post-merger era. The franchise began play in 1976 in the NFC West division but switched conferences with the Buccaneers after one season and joined the AFC West.

A Pigskin Prediction for Your Portfolios?

Will your portfolio rise with the Rams – or get pummeled by the Patriots?

That’s what adherents of the so-called Super Bowl Theory would likely conclude. The Super Bowl Theory holds that when a team from the old National Football League wins the Super Bowl, the S&P 500 will rise, and when a team from the old American Football League prevails, stock prices will fall.

It’s a “theory” that has been found to be correct nearly 80% of the time – for 40 of the 52 Super Bowls, in fact.

Not that it hasn’t had its shortcomings. One need look back no further than last year’s win by the NFC champion Philadelphia Eagles against the AFC Champion Patriots (who once were the AFL’s Boston Patriots) to find an instance where it turned out to be a loser, market-wise, with the S&P 500 down more than 6% (though for most of the year it was quite a different story). Ditto the year before when the epic comeback by those same AFC Champion Patriots against the NFC champion Atlanta Falcons didn’t forestall a 2017 market surge.

Nor is it always the Patriots who play Super Bowl Theory spoilers – the year before that, the AFC’s (and original AFL) Broncos’ 24-10 victory over the Carolina Panthers, who represented the NFC, also proved to be an “exception.”

Market Makings

That was an unusual break in the streak that was sustained in 2015 following Super Bowl XLIX, when the New England Patriots (yes, those same Patriots) bested the Seattle Seahawks 28-24 to earn their fourth Super Bowl title. It also “worked” in 2014, when the Seahawks bumped off the legacy AFL Denver Broncos, and in 2013, when a dramatic fourth-quarter comeback rescued a victory by the Baltimore Ravens – who, though representing the AFC, are technically a legacy NFL team via their Cleveland Browns roots.

Admittedly, the fact that the markets fared well in 2013 was hardly a true test of the Super Bowl Theory since, as it turned out, both teams in Super Bowl XLVII – the Ravens and the San Francisco 49ers – were NFL legacy teams.

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Who’s your pick to win Super Bowl 53? Cast your vote here!

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However, consider that in 2012 a team from the old NFL (the New York Giants) took on – and took down – one from the old AFL (the New England Patriots – yes, those New England Patriots). And, in fact, 2012 was a pretty good year for stocks.

Steel ‘Curtains’?

On the other hand, the year before that, the Pittsburgh Steelers (representing the American Football Conference) took on the National Football Conference’s Green Bay Packers – two teams that had some of the oldest, deepest and, yes, most “storied” NFL roots, with the Steelers formed in 1933 (as the Pittsburgh Pirates) and the Packers founded in 1919. According to the Super Bowl Theory, 2011 should have been a good year for stocks (because, regardless of who won, a legacy NFL team would prevail).

But as you may recall, while the Dow gained ground for the year, the S&P 500 was, well, flat.

And then there was the string of Super Bowls where the contests were all between legacy NFL teams (thus, no matter who won, the markets should have risen):

• 2006, when the Steelers bested the Seattle Seahawks;
• 2007, when the Indianapolis Colts beat the Chicago Bears 29-17;
• 2009, when the Pittsburgh Steelers took on the Arizona Cardinals (who had once been the NFL’s St. Louis Cardinals); and
• 2010, when the New Orleans Saints bested the Indianapolis Colts, who had roots back to the NFL legacy Baltimore Colts.

Sure enough, the markets were higher in each of those years.

As for 2008? Well, that was the year that the NFC’s New York Giants upended the hopes of the AFL-legacy Patriots (yes, those Patriots) for a perfect season, but it didn’t do any favors for the stock market. In fact, that was the last time that the Super Bowl Theory didn’t “work” (well, until this past year – oh, and the year before that – and the year before…).

Patriot Gains

Times were better for Patriots fans in 2005, when they bested the NFC’s Philadelphia Eagles 24-21. Indeed, according to the Super Bowl Theory, the markets should have been down that year – but the S&P 500 rose 2.55%.

Of course, Super Bowl Theory proponents would tell you that the 2002 win by (those same) New England Patriots accurately foretold the continuation of the bear market into a third year (at the time, the first accurate result in five years). But the Patriots’ 2004 Super Bowl win against the Carolina Panthers (the one that probably nobody except Patriots fans remember because it was overshadowed by Janet Jackson’s infamous “wardrobe malfunction”) failed to anticipate a fall rally that helped push the S&P 500 to a near 9% gain that year, sacking the indicator for another loss (couldn’t resist).

Bronco ‘Busters’

Consider also that, despite victories by the AFL-legacy Denver Broncos in 1998 and 1999, the S&P 500 continued its winning ways, while victories by the NFL-legacy St. Louis (by way of Los Angeles) Rams (that have now returned to the City of Angels) and the Baltimore Ravens did nothing to dispel the bear markets of 2000 and 2001, respectively.

In fact, the Super Bowl Theory “worked” 28 times between 1967 and 1997, then went 0-4 between 1998 and 2001, only to get back on track from 2002 on (though “purists” still dispute how to interpret Tampa Bay’s 2003 victory, since the Buccaneers spent their first NFL season in the AFC before moving to the NFC).

Indeed, the Buccaneers’ move to the NFC was part of a swap with the Seattle Seahawks, who did, in fact, enter the NFL as an NFC team in 1976 but shuttled quickly over to the AFC (where they remained through 2001) before returning to the NFC (see below). And, not having entered the league until 1976, regardless of when they began, can the Seahawks truly be considered a “legacy” NFL squad? Bear in mind as well, that in 2006, when the Seahawks made their first Super Bowl appearance – and lost – the S&P 500 gained nearly 16%.

As for Sunday’s contest, the Patriots have been here before (to put it mildly), the Rams (just) twice – but not since 2002 (when they lost to the Patriots, 20-17 in the first Super Bowl to be played in February, following the one-week delay in the NFL season after the 9/11 attacks).

Indeed that victory is seen by many as marking the beginning of the current Patriot “dynasty” (and one that, no doubt, the Rams would like to “avenge”).

Jersey ‘Sure’?

On a separate note, despite (technically) being the home team, the Rams have decided to wear their blue/yellow throwback jerseys – meaning that the Patriots will (again) be wearing white jerseys. The Patriots are doubtless pleased with the Rams’ decision because, dating back to 2005 with the Patriots in Super Bowl XXXIX, the team wearing white jerseys has won 12 times. That’s 12 wins in 14 years with the only teams to win while wearing colored uniforms in that span being the Packers in Super Bowl XLV… oh, and the Eagles last year against… well, you know.

All in all, it looks like it should be a good game.

And that – whether you are a proponent of the Super Bowl Theory or not – would be one in which regardless of which team wins, we all do!

- Nevin E. Adams, JD

Note: Seattle is the only team to have played in both the AFC and NFC Championship Games, having relocated from the AFC to the NFC during league realignment prior to the 2002 season. The Seahawks are the only NFL team to switch conferences twice in the post-merger era. The franchise began play in 1976 in the NFC West division but switched conferences with the Buccaneers after one season and joined the AFC West.

“Consistent” Messages

By some accounts, inertia has long been the bane of the voluntary retirement system—and a great deal of money and time has been spent overcoming the reluctance of workers to become savers, and of savers to do so at levels sufficient to achieve their retirement goals.

That same inertia likely accounts for the fact that, once set on a savings course, or better still, set on one that improves on that initial setting,¹ participants in overwhelming numbers appear to “stay the course”—and do so through good times and times that aren’t as good.

So, what happens to those participants who stay the course, those“steady,” consistent participants?

The Employee Benefit Research Institute (EBRI), through the EBRI/ICI Participant-Directed Retirement Plan Data Collection Project, has long tracked the changes in consistent participant accounts in a database that is the largest, most representative repository of information about individual 401(k) plan participant accounts in the world.² The EBRI/ICI project is unique because it includes data provided by a wide variety of plan recordkeepers and, therefore, portrays the activity of participants in 401(k) plans of varying sizes—from very large corporations to small businesses—with a variety of investment options.

Drawing from that database, which includes demographic, contribution, asset allocation, and loan and withdrawal activity information for millions of participants, EBRI has for years produced estimates of the cumulative changes in average account balances—both as a result of contributions and investment returns—for several combinations of participant age and tenure.

And, for those millions of individual participant accounts in the database, we are able to project changes in those average balances based on actual individual rates of contribution and the investment choices in place at a specific point in time.³

As a result, we are able to estimate that the average account balance of an individual ages 25‒34, with one to four years of tenure at his or her current employer,⁴ increased 4.6 percent in June, while a participant ages 55‒64 with 20‒29 years of tenure had an average account increase of 2.5 percent.⁵

This capability is significant for several reasons. It provides a monthly update of a comprehensive perspective on 401(k) account movement. It has provided the ability to quickly and accurately estimate the impact of major market swings on a broad swathe of the 401(k) market.⁶

And it serves to remind us that those 401(k) balances are affected not just by the investment markets, but by the savings we invest—consistently.

-Nevin E. Adams, JD

You can access reports of both cumulative and monthly average account changes at http://www.ebri.org/?fa=401kbalances

¹ Via plan design devices such as automatic enrollment, contribution acceleration, or asset allocation funds that rebalance automatically over time.

² As of December 31, 2010, the EBRI/ICI database included statistical information on about 23.4 million 401(k) plan participants, in 64,455 employer-sponsored 401(k) plans, representing $1.414 trillion in assets.

³ That specific point in time being the annual update of recordkeeping information from data providers, currently 12/31/2010. The projections assume no change in behavior (such as deferral rates or interfund transfers).

⁴ For individual participants in the database from December 31, 2010 to the valuation date of June 30, 2012.

⁵ Note that that increase is based on not just investment returns, but also new contributions. Note also that contributions tend to have a larger percentage impact on the rate of growth in smaller accounts.

⁶Perhaps most notably for an Oct. 7, 2008, congressional hearing on “The Impact of the Financial Crisis on Workers’ Retirement Security.” See EBRI’s testimony online here.

Unbelieve Able

As my wife and I drove to pick up our eldest for the Thanksgiving break, I saw something I never thought I would see again: $1.95/gallon gasoline (even more incredible, that was while I was still in the borders of Connecticut, which imposes some of the highest gasoline taxes in the nation).

Indeed, what with the election, the introductions of the new Administration’s team, the bailout/rescue of the week, and the continued jitters of the world markets, the reality that gasoline costs about half what it did in July has gone almost unreported. Still, I heard a report last week that suggests the net impact of that drop in price has put about $500 billion back in American pockets—now THAT’S a “stimulus package” we can believe in!

Still, what I find interesting about that dramatic turnaround in oil prices is that it happened so rapidly that the explanations of why it ran up so quickly are still ringing in my ears. I remember all too well the pundits laying the price hikes off on the growth in the emerging industrial economies of China and India, the impact of hurricanes on production in the gulf, concern about turmoil in the Middle East, the perceived vulnerability of the shipping lanes....Others, of course, cited the fact that we hadn’t built a new refinery in more than a decade, and that we refuse to consider drilling in areas that wouldn’t seem to pose a threat to man nor beast. But what I remember most vividly was how consistently the so-called experts denied that “mere” speculation could account for these kinds of increases.

Yeah, right.

IMHO, one of the most frustrating things about the current economic crisis is that nobody seems to know what is causing it and, thus, no one can offer a credible idea of how long it will last or what can (or should) be done to hasten its end, much less what the “rest of us” are supposed to do in the “interim.”

While financial pundits are, these days, prone to trace cyclical “corrections” to the bursting of “bubbles”—housing, tech—the resulting declines are generally not that sudden, nor are they, generally speaking, wholly unanticipated. Rather, they are the result of pressures on our financial system like the geological pressures that often result in earthquakes or the eruption of volcanoes. And, like those geophysical manifestations, there are often precursors to the actual “big event,” as well as significant after effects (nor do you have to be a financial genius to see them—how many times did you look at the soaring prices of homes in your neighborhood and think “this can’t go on?”). The problems at Freddie Mac and Fannie Mae that ostensibly triggered the most recent crisis were so blatantly obvious that even Congress felt compelled to hold hearings on the subject (and back in 2006, no less!).

At the outset of the current crisis, I was encouraged to see the federal government step forward to help and facilitate some—but not every—institution that appeared to be struggling. In hindsight, that may not have been as well-reasoned as one might want to believe, but at least there was the appearance of selective and intelligent, if not appropriate, involvement.

We want to believe that the so-called experts know what they’re doing. But with every passing day, it seems more and more obvious that they don’t. Little wonder, then, that the American electorate is increasingly disinclined to simply hand over a blank check. Little wonder also that some of the market’s “natural” remedies have apparently been staved off by people waiting to see how much the government would do—knowing full well that an outgoing Administration desperate for its legacy, and an incoming Administration anxious to prove itself would be more than somewhat inclined to do more than might otherwise be the case.

Retirement plan investors are consistently and, IMHO, prudently told to “stay the course” in times of turmoil; reminded that, even when change seems appropriate, even essential, to be careful about overreacting. It’s an approach that advisers, in large part, applaud and support.

Maybe it’s time the folks in Washington took a bit of THAT advice to heart.

- Nevin E. Adams, JD

'Nothing' Doings

I wouldn’t for a second suggest that the current financial/economic crisis that we are enmeshed in isn’t “real,” or that the efforts to remedy it thus far aren’t well-intentioned, but it’s hard to shake the feeling that the words put forth to explain the situation—and thus the solutions put forward to redress that situation—are being done by folks desperate to be seen to be doing something, but not quite (at all?) sure what that something should be. And, IMHO, that inclination won’t diminish with a new Administration eager to prove itself. Let’s face it—even when doing nothing might be the best medicine (and I, for one, am at that point), we tend to believe that “something should be done.”

Meanwhile, we have retirement plan participants, most of whom—again—appear to be riding this one out. Oh, there are signs of change on the fringes—some modest reductions in average deferral rates, slight upticks in hardship distributions, and, on particularly volatile days in the market, a bump in transfer activity. Still, for the very most part, participants appear to have taken the “stay the course” message to heart. Nor are they sleeping through the crisis; all the major providers are reporting a significant increase in call center volumes—but participants appear to be doing little more than assessing the damage and checking on their options. That, of course, is widely taken to be a good thing.

I’ve always thought it was interesting that we bemoan the negatives of participant inertia (or sometimes try to turn that negative into a positive via “automatic” solutions)—except when it manifests itself during times of market turmoil. At those times, it’s the rare industry pundit who doesn’t applaud the “wisdom” and calm shown by participants. It’s that one time when “doing nothing” is not a problem to be solved, but an indication of prudence.

“This time” may be different, of course—and the call center inquiries may well suggest that participants are making an active decision to stay put, though it seems to me more likely that those inclined to make a change simply aren’t sure what to do. Human beings may, like an object at rest, tend to remain so—but with this much turmoil still going on after all this time, in my experience, people feel better if they can actually DO something.

"Action" Steps

So, here are some things participants can do:

Get started on rebalancing by changing the investment elections of new contributions, rather than transferring existing balances. It will take longer to realign the entire account, but at least you aren’t realizing those as-yet-unrealized losses.

Increase your current deferral rates. When you think about just how much cheaper those retirement plan investments are compared with a year ago, it’s hard to pass up that kind of bargain. More so if you aren’t yet saving at the maximum level of the match.

Consider automated rebalancing. The vast majority of providers now have in place mechanisms that will, on some preset frequency (monthly, quarterly, annually), automatically rebalance individual accounts in accordance with your investment elections. It’s a good way to keep things in balance without having to worry (or remember) about the best time to do so.

Those 12/31 statements are now only about a month away—but there’s no reason to wait till then to start taking proactive steps on the road to portfolio “recovery.”

- Nevin E. Adams, JD