A Super-Duper Bowl

So what did the Super Bowl mean?

No, not the game last night, although a few comments are necessary. First, it was a great game. Both teams played magnificently in a high-pressure situation. Second, the New Orleans economy will benefit from all the activity—hotel rooms, restaurants, rental cars, and generators. Super Bowl week is an economic boon to any town. And third, the vaunted “Super Bowl Indicator” is meaningless.

The indicator is supposedly a way to predict whether the market will go up or down in a given year. If the NFC wins, it’s supposed to be a bull market; if the AFC wins, expect a bear market. The indicator has been correct about 80% of the time. So what’s the problem?

This is a classic case or correlation not implying causation. There is no reasonable mechanism whereby an NFC victory would affect the economy and the market. The Super Bowl Indicator is super-foolishness.

But what I’m talking about is the statistical super bowl that came out on Friday: we got the employment report, benchmark revisions, the purchasing manager’s index, and January auto sales.

They all look like an economy that’s muddling along—not in recession and not booming, either. It’s certainly not growing fast enough to reduce unemployment much, or to get the Fed to change. We’ll likely get more of what we’ve had for the past four years: zero-percent short-term interest rates, continued asset purchases by the Fed, and a fire hose of liquidity aimed at the asset markets, which has been pushing them higher.

This may not be healthy in the long-run, but it’s my job to invest based on what’s happening. I don’t have to like it.

Douglas R. Tengdin, CFA

Chief Investment Officer

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