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Why Investors Should Root For An SEC Team To Win The NCAA Tournament

March 20, 2019 3:45 pm
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The NCAA Men's Basketball Tournament kicks off this week and while that is sure to mean some lost productivity in the workplace when games commence in earnest on Thursday, investors have a little more at stake than office pool bragging rights.

What To Know

While sports-related market indicators are more entertainment than sound investment advice, historical data confirm the S&P 500 tends to perform well after a team from the Southeastern Conference (SEC) wins the tournament.

“There have been 11 SEC championships, the last coming in 2012, courtesy of the Kentucky Wildcats,” according to Schaeffer's Investment Research. “After an SEC win, the S&P was higher from April through December 100% of the time, with an average gain of 9.56%.”

Why It's Important

Investors owning exchange traded funds, such as the SPDR S&P 500 ETF (NYSE:SPY), the iShares Core S&P 500 ETF (NYSE:IVV) and the Vanguard S&P 500 ETF (NYSE:VOO), should like their chances for post-tournament market upside.

Seven of the 14 members of the SEC are participating in this year's tournament and two – Kentucky and Tennessee – are No. 2 seeds in their respective regions. Tennessee is a 3/1 shot to win the South Region, trailing only No. 1 seed Virginia at 6/5. Kentucky is also a 3/1 shot to win the Midwest Region where North Carolina is the top seed.

Big Ten fans, including plenty at Benzinga headquarters in Detroit, have a lot to watch for this year with eight of the conference's 14 members in the tournament including No. 2 seeds Michigan and Michigan State. Investors may not want to see the Big Ten win the crown, though.

“There have been 11 Big Ten champions in NCAA history, and the S&P averaged a loss of 4.76% in those years, and was higher at year-end just 36% of the time,” according to Schaeffer's.

What's Next

In terms of schools in this year's tournament that have multiple championships, investors may want to pull for Florida or Kentucky because the S&P 500 generated post-tournament gains 100 percent of the time following titles by those schools.

Conversely, the benchmark U.S. equity gauge generated post-tournament upside just 60 percent of the time after Duke won the title, according to Schaeffer's data. Duke is this year's overall No. 1 seed.

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