Olympics 2016 market preview: who’ll be winning gold at Rio?
14 July 2016: Ahead of the opening of the Olympics games on August 5th, Colin Cieszynski looks at which stocks could be winning gold, silver and bronze in Rio.
Within this special report Colin Cieszynski focuses on:
• How national and US sector indices have performed before and post the Olympic games dating back to Barcelona 1992
• How the impact of Summer Olympics and US Presidential election cycles intermingle
• How the host country tends to perform before, during and after the Olympic games
• How apparel and beverages stocks have tended to outperform the markets in the year running up to the Olympics
The Rio Olympics is quickly approaching and with the focus currently on the qualifying events and withdrawals, fans are eagerly waiting to see how their medal hopefuls will do. Ahead of the opening ceremony, it’s a good time to take a look at who could be the winners and losers in the stock market.
In addition to the athletes and their accomplishments, the Olympics also provides a showcase to the world of the host city and country, as well as an opportunity for corporations (mainly in consumer products) to promote themselves and their products to a huge global audience.
This report analyses how national and US sector indices have performed before and after Olympics Games dating back to Barcelona 1992, using the S&P 500 as a reference for comparison. Because the summer games are held within a few months of US Presidential elections, the Presidential cycle may have also influenced some of the games.
Looking at the S&P 500 first, the benchmark index has historically tended to rise 2-3 months ahead of the games, but decline in the three months before. It then starts to rebound a week ahead of the event and rally through the games. The S&P then tends to have a letdown in the first three months after (which may be tied to US elections) and then inclines to rebound 3-12 months afterward.
The host country index, meanwhile, has tended to underperform in the year leading up to the games, with facility completion uncertainty and fear of cost overruns possibly overhanging the markets. The host country then has outperformed in the week leading up to the games and underperformed during the games. The host index has then staged an even bigger post-Olympic sell-off in the first three months afterward. Then the host has outperformed by a wide margin, on average in the 3-12 months afterwards showing the spotlight does bring positive market effects in the medium term.
Two of the sectors most closely associated with the Olympics are apparel (shoes and sports equipment) and beverages (beer and soft drink companies are among the bigger sponsors of large sporting events in general). Both of these sectors have tended to really outperform the markets in the year running up to the Olympics as companies promote their association ahead of time.
The apparel sector historically has seen a particularly big boost from the Olympics outperforming during the games, avoiding the broad market’s post – Olympic letdown and delivering above market performance over the year afterward.
The beverage sector, on the other hand has performed slightly below market during the games, does see a post-games drop and its longer term performance has been mixed, better than the broad index, but not as strong as the apparel sector.