By Sam Stovall
For a number of years, we at Standard & Poor's have tracked the Super Bowl Theory, which is a nonserious way for investors to divine the full-year performance for the stock market based on the outcome of pro football's Super Bowl (see BW Online, 1/26/04, "Would a Panthers' Win Boost the Bull?"). Well, now it's baseball's turn.
Only this time, instead of the stock market, we decided to see if the outcome of the sport's marquee event, the World Series, had any predictive value when it came to another great American pastime: politics. Specifically, could the uniform color of the winner of the Fall Classic help identify the likely victor of the upcoming Presidential election?
The answer is yes -- if you're willing to accept correlation without causation, and you expect history to repeat itself. And of course, one other well-worn qualifier is in order: Past performance isn't indicative of future results!
Take a look at the table below, which focuses on the dominant uniform color of the team that won the World Series during each Presidential election year since 1908, the first year that had both events. Most teams have had either blue or red as their primary color. (The Oakland Athletics, Pittsburgh Pirates, and Washington Senators didn't, and weren't counted.)
Using the widely adopted color scheme of red for Republicans and blue for Democrats -- check out any electoral map on TV or in magazines -- how successful was the winning uniform color in signaling the victorious party?
As this table indicates, if you had wagered that the Democratic contender would be victorious each year a blue-uniformed team won the World Series, your batting average would have been only .286. You would have been wrong more than 7 times out of every 10. A post-season batting average like that won't get you into the Hall of Fame.
So does this mean the colors are of no use in selecting the next President? Not at all. In fact, they would have been very helpful if you had used uniform colors as a contrary indicator.
What does that mean for 2004? Since the dominant color for both the Boston Red Sox and St. Louis Cardinals is red, this highly unscientific study implies a 7 in 10 chance that the Democratic contender will win this election, no matter who wins the World Series. And that means John Kerry should celebrate the outcome of the series -- even if his hometown Red Sox succumb once more to the "Curse of the Bambino."
Standard & Poor's Stock Appreciation Ranking System (STARS)
5-STARS (Buy): Total return is expected to outperform the total return of the S&P 500 Index by a wide margin, with shares rising in price on an absolute basis.
4-STARS (Accumulate): Total return is expected to outperform the total return of the S&P 500 Index, with shares rising in price on an absolute basis.
3-STARS (Hold): Total return is expected to closely approximate that of the total return of the S&P 500 Index, with shares generally rising in price on an absolute basis.
2-STARS (Avoid): Total return is expected to underperform the total return of the S&P 500 Index, and share price is not anticipated to show a gain.
1-STARS (Sell): Total return is expected to underperform the total return of the S&P 500 Index by a wide margin, with shares falling in price on an absolute basis.
As of Sept. 30, 2004, SPIAS and their U.S. research analysts have recommended 29.2% of issuers with buy recommendations, 58.5% with hold recommendations and 12.3% with sell recommendations.
All of the views expressed in this research report accurately reflect the research analysts' personal views regarding any and all of the subject securities or issuers. No part of the analysts' compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report.
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This research report was prepared by Standard & Poor's Investment Advisory Services LLC ("SPIAS"), and may have been provided to you either by: (i) Standard & Poor's under a license agreement with The McGraw-Hill Companies, Inc., which holds the copyright to this report; or (ii) a Standard & Poor's client who is granted a sub-license by Standard & Poor's. This equity research report and recommendations are performed separately from any other analytic activity of Standard & Poor's. Standard & Poor's equity research analysts have no access to non-public information received by other units of Standard & Poor's.
Standard & Poor's does not trade in its own account. SPIAS is affiliated with various entities, which may perform services for companies covered by the recommendations in this report. Each such affiliate is operationally independent from SPIAS.
This material is based upon information that we consider to be reliable, but neither SPIAS nor its affiliates warrant its completeness or accuracy, and it should not be relied upon as such. Assumptions, opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice.
Past performance is not indicative of future results.
This material is not intended as an offer or solicitation for the purchase or sale so any security or other financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation of particular securities, financial instruments or strategies to you. Before acting on any recommendation in this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice.
Stovall is chief investment strategist for Standard & Poor's