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No, a Phillies World Series will not cause an economic downturn

This is an excerpt from the CNBC Make It newsletter. Subscribe here.

By day, I’m a mild-mannered financial reporter and on-and-off newsletter writer. By night, I’m a rabid sports fan from Philadelphia.

So naturally, as my beloved Phillies made their first playoff appearance since 2011, several of my contacts sent me the following tidbit from the Morning Brew: “In the past 100 years, the surest sign of an economic downturn has been Philly-based baseball. team winning the World Series. It happened in 1929, 1930, 1980, and 2008.”

As a fan of the most losing team in the history of American professional sports, the instinct is to catastrophize: either the Fightins or the financial markets are doomed to collapse!

But this is where the financial writer trick comes in handy. For one thing, the global financial crisis and associated bear market began in 2007, not 2008. But even though the claim is that the Philly World Series and financial downturns go hand in hand, it’s worth remembering that a million of these types of stupid pointers and truisms have been circulating among market watchers for decades – and they rarely mean anything.

Market “indicators” that do not indicate much

Have you ever heard of the hem index? This market theory suggests that shorter skirt styles become fashionable during economic booms (think 1920s flapper dresses and ’80s miniskirts) and that women’s fashion becomes more modest before economic downturns. .

While there is certainly some correlation here, it’s far from a causal relationship. As a recent analysis by InStyle puts it, “Instead, many different factors — economics, politics, pandemic outbreaks, and social movements — have affected the aesthetics consumers are responding to.”

Or what about the so-called January barometer? “As January goes, so goes the year,” according to an old market saw, with positive months presaging good years in the market and negative months indicating downturns.

It may seem prescient this year given how things have gone after a weak January. But 2020 and 2021 — two huge years in the stock market — started with negative returns in January. Overall, Fidelity analysts found that the rule tends to work better in January than in January, which makes sense. The US stock market, after all, has always tended to go up.

Coming back to sports, consider the Super Bowl indicator, which posits that the market tends to perform better when an NFC team wins the big game than an AFC team. But the NFC champion Rams won this year and the market went down again.

By that logic, a Super Bowl victory for the NFC-winning New York Giants in February 2008 should have meant a good year for stocks. Instead, markets continued to decline. Maybe in anticipation of a Phillies championship in October.

Although economists and investors have fun finding these correlations, they have almost no impact on the actual behavior of the economy or the stock market compared to tangible factors such as inflation, interest rates interest, consumer spending and business profits.

In other words, if the economy crashes, it won’t be because the Phillies won it all. And if the Phillies actually fail to go all the way, well, there’s always the Eagles.

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Margarita W. Wilson

The author Margarita W. Wilson