Knicks Playoff Win Correlated With Past Market Peaks, BofA Notes
8h ago|4 min readStandard
Fazen Markets Editorial Desk
Collective editorial team · methodology
contrarian-indicatorsmarket-sentiment
Fazen Markets Editorial Desk
Collective editorial team · methodology
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Bank of America's quantitative strategy team highlighted a correlation between the New York Knicks' recent playoff success and historical US equity market peaks in a note distributed on June 14, 2026. The observation forms part of a broader analysis of contrarian sentiment indicators, which have recently flashed cautionary signals amid extended market valuations. The S&P 500 has rallied over 18% year-to-date, pushing the index to new all-time highs above 5,600.
This indicator fits a pattern of anecdotal, sentiment-based signals that often gain prominence near cyclical market tops. The last time the Knicks advanced to the Eastern Conference Finals, in 2000, the dot-com bubble was within months of its ultimate peak. Similarly, their 1994 playoff run, which ended in a Finals appearance, preceded a period of significant market volatility and a flat year for the S&P 500. These events coincide with periods of peak investor optimism and mainstream attention on financial markets.
The current macro backdrop features the S&P 500 at record levels with the VIX volatility index hovering near multi-year lows below 12. This suggests a high degree of complacency among investors. The catalyst for highlighting this correlation now is the convergence of several other contrarian sell signals, including elevated exposure to equity ETFs and stretched bullish sentiment readings in surveys like the AAII.
Bank of America's analysis points to specific historical precedents where Knicks success overlapped with market peaks. Following the Knicks' 2000 conference finals appearance, the Nasdaq Composite, then the benchmark for tech speculation, peaked in March 2000 and subsequently crashed over 75%. The S&P 500 entered a bear market later that year, declining over 40% from peak to trough.
A comparison of market returns following major Knicks playoff runs shows a stark contrast. In the 12 months following their 1994 Finals run, the S&P 500 returned a muted 2.1%, significantly underperforming its long-term average. This contrasts with the average 12-month return of 8.5% for the index during the period from 1990 to 2025.
| Event | Knicks Playoff Result | S&P 500 12-Month Forward Return |
|---|---|---|
| 1994 | NBA Finals | +2.1% |
| 2000 | Eastern Conference Finals | -9.1% |
| 2026 | Eastern Conference Finals | TBD |
The current market rally has pushed the S&P 500's forward P/E ratio to approximately 20.5x, a level that has historically corresponded with lower subsequent returns.
The primary implication is for broad market sentiment rather than specific sectors. Highly speculative areas of the market, such as non-profitable tech stocks and meme stocks, could be most vulnerable to a shift in risk appetite. ETFs like ARKK, which holds a basket of disruptive innovation companies, often lead market downturns fueled by sentiment reversal. Stocks with high retail ownership and momentum-driven profiles could see accelerated selling.
A key counter-argument is that correlation does not imply causation. The Knicks' success is merely a symptom of a euphoric New York-centric financial and media environment, not a direct cause of market movements. The indicator's predictive power is anecdotal and based on a very small sample size, making it unreliable as a standalone timing tool.
Positioning data from the CFTC shows asset managers have built significant net long positions in S&P 500 futures. Retail flow into leveraged long ETFs has also accelerated in recent weeks, indicating widespread bullish conviction that could be susceptible to a unwind.
The immediate catalyst for testing market resilience will be the Q2 2026 earnings season, which begins in earnest around July 15. Analyst estimates are projecting year-over-year earnings growth of 8.5% for the S&P 500. Any widespread misses or cautious guidance could validate concerns about overextension.
Technical levels are critical. A decisive break below the S&P 500's 50-day moving average, currently near 5,450, would signal a potential near-term trend change. Conversely, a sustained break above 5,650 could invalidate the bearish sentiment signals and trigger a new wave of momentum buying.
The next Federal Open Market Committee meeting on July 30 will be pivotal. Markets are currently pricing in a high probability of a rate cut. Any shift to a more hawkish tone from Chair Powell could be the fundamental trigger that aligns with the cautionary sentiment indicators.
The Knicks indicator is not a reliable, standalone predictor of market crashes. It is a sentiment gauge, one of many that strategists monitor to assess investor euphoria. Its value lies in its contrarian nature; when sports success in a major financial capital captures widespread attention, it can signal that market optimism is reaching an extreme. Historical precedents exist, but the sample size is small, and the correlation does not confirm a direct causal relationship.
Several other indicators align with a cautious outlook. The American Association of Individual Investors (AAII) Bull-Bear Spread shows bullish sentiment well above its historical average. the CNN Money Fear & Greed Index has recently been in "Extreme Greed" territory. Margin debt levels are also elevated, indicating investors are using significant use to maintain long positions, which can accelerate selling during a downturn.
Long-term investors should not make portfolio decisions based solely on anecdotal sentiment indicators. These signals are best used as a context-setting tool within a broader investment process grounded in fundamentals and asset allocation. For a long-term portfolio, the appropriate response is to ensure diversification aligns with risk tolerance and investment horizon, not to time the market based on sports correlations. Rebalancing back to target weights may be prudent if recent gains have skewed allocation percentages.
The Knicks indicator adds to a mosaic of data suggesting peak investor optimism, which historically presents a headwind for future equity returns.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.
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