By Colin Cieszynski, CFA, CMT, CFTe Chief Market Strategist CMC Markets The 2015 Women’s World Cup kicked off on Saturday June 6th and is being held across Canada for the next month, wrapping up on Sunday July 5th. While major sporting events don’t tend to have an influence on stock markets as a whole, they can have an impact on specific stocks and sectors, particularly those with an interest in the event. In this report, we will take a look at how Soccer related stocks and those of major advertisers performed during and after last year’s Men’s World Cup and what that could mean for the same stocks this year. How can the World Cup influence trading? Because of the big audiences, shares of companies that advertise prominently can attract a lot of attention to their products and also apparently their stocks. Companies that sponsor teams and athletes may also be impacted depending on how well their chosen representatives perform. The World Cup in 2014 was also a huge social media event, particularly for Twitter which saw big increases in users and traffic during the tournament. The World Cup brings a lot of attention to the sport and its finances, particularly in countries where it is not as actively followed on a regular basis. This increased focus on football can impact the shares of companies involved in the sport, such as club teams. What was the immediate impact of the 2014 Men’s World Cup on trading? In the table below, we looked at how major tournament sponsors in the active clothing, food and beverage, and other sectors performed before and during (May and June) versus after (July and August) the 2014 World Cup.
Source: CMC Markets For the most part, the World Cup had a positive effect on the share prices of companies involved in, related to, or benefitting from the event while it was on, but after the big party ended many of the stocks suffered a big hangover. Surprisingly, despite its sponsorship of tournament star Lionel Messi, Adidas shares performed dismally during and after the tournament, underperforming both the market and competitor Nike. Beverage companies Coca-Cola and Anheuser Busch Inbev outperformed the market in May and June then underperformed in July. This hangover seems to be more than just a case of a “what goes up must come down” move as McDonalds failed to rally during the tournament but still sold off afterwards. Some companies did poorly ahead of the event but then did really well through the summer on all of the attention they generated, particularly in the case of Twitter and Sony. Manchester United also climbed during June and was able to carry the halo effect through July but then tumbled back in August. But was the World Cup effect short term or sustainable? The chart below shows that the impact of the World Cup on share prices depended on the company. Source: CMC Markets The impact was most pronounced and sustainable on the Nike vs Adidas battle. The positive sentiment Nike gained from the tournament propelled the shares higher right through the end of the year. In contract, Adidas’ shares were unable to recover from their tournament related sell off and sputtered through the rest of 2014 dramatically underperforming its American rival. Some companies saw an initially positive response fade as the year progressed. For Manchester United, the rally and retreat was brief and relatively small with most of the action contained to July. Twitter perhaps had the biggest rise and fall related to the tournament. The big growth in traffic during the tournament drove the shares dramatically higher right through the summer. Once autumn arrived, however, and traders realized that effect was a one-time, short-term bump and not the dawn of a new era for the company, the shares came crashing right back down, and have continued to struggle to this day. What effect could this year’s Women’s tournament have on related stocks?
|Anheuser Busch Inbev||3.87%||4.57%||(6.06%)||3.52%|
|Johnson & Johnson||0.17%||3.11%||(4.33%)||3.64%|
Source: CMC Markets This year finds that the battle between Nike and Adidas on the field may also play out again in the stock market. Heading into the tournament, the shares have been heading in opposite directions with the street clearly expecting Nike to stage a repeat performance. Not all of the same sponsors are back, but interestingly, this time around Anheuser Busch InBev is promoting its Labatt brand which is huge in host country Canada rather than its US/global Budweiser brand. Twitter has continued to struggle in the last month, suggesting that the street is not expecting this year’s event to have the same impact on user or traffic levels as last year’s tournament. CMC Markets is an execution only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
|Women's World Cup||2015 Sponsor Performance|
|Anheuser Busch Inbev||0.43%|
|Johnson & Johnson||0.95%|