Yankees a Bellwether for Stocks? Fuhgeddaboudit!

The New York Yankees extended their late-season surge1507920266371 last week, eliminating the Cleveland Indians and moving on to the American League championship series. If they win the series against the Houston Astros -- after a rough start this weekend -- they will advance to their 41st World Series out of the 114 since 1903. And, as many investors and sports fans know, the S&P 500 has averaged more than a 12 percent real return since 1903 over the 12 months after the Yankees made the World Series, versus only 6 percent in other years.1507920287091

Nonetheless, investors should beware of sports/market correlations. The granddaddy of this metric is the Super Bowl indicator.1507920314846 It was introduced in a 1978 column1507920711576 by Leonard Koppett pointing out that every time a team from the old National Football League1507920732686 won the Super Bowl, stocks went up the following year; and every time a team from the old American Football League won, the market went down. The indicator had worked perfectly for all 11 Super Bowls that had been played at the time. Koppett's point was the silliness of correlations, but the indicator worked for the next 20 years. It then failed four years in a row, but bounced back to be correct 13 of the next 14 years.1507920755079