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Winter Olympic Games Impact on the Stock Market

The Winter Olympic Games from Vancouver, Canada, start Friday.   With so many companies heavily sponsoring the games by funneling millions of dollars to promote their products to what they hope will be a captive audience, does the market benefit from the winter games?   Do major sponsors see gains in their share prices?

How has the market reacted in the past to this event?

Recent History – The Market

Looking back at all of the Winter Olympic Games held since 1960, the market on average has shown to be “on the fence” with how to react during the time when the Olympics are in play.   On average, the S&P 500 has gained in just over 48% of sessions between opening and closing ceremonies, generating an average loss of 0.11%.   Conversely the Dow Jones Industrial Average has gained in just over 50% of sessions during these games, producing an average gain of 0.21%.   Even a simple analyst like myself can see the the impact on the overall market during the games is negligible.

You can begin to see a rosier picture when you look at the period leading up to the Olympics, with almost 67% of sessions gaining the day the games start (the opening ceremonies), “winning” an average return on the S&P 500 and DJIA of 0.25% and 0.21%, respectively.   The numbers level out when you look at the week leading up to the event with around 55% of sessions gaining, producing a modest return of half a percent.

Recent History – The Stocks

The stocks paint a different story of what the impacts of the Olympic Games are.   Looking at the top three Worldwide Olympic sponsors (General Electric – GE, Coca-Cola – KO, and McDonalds – MCD) and the effect becomes noticeable.   During the period in which the games are in play, GE, KO and MCD gained in far less sessions than the market average, at 34%, 40% and 43%, respectively.   However, KO and MCD were able to generate gains on average of around half a percent, which was skewed to a certain extent by rallies that coincidentally took place during the Japanese games in 1972 and 1998.   GE, on the other hand, was a significant laggard, averaging a loss of 1.17% during the games, having not benefitted from the same rally as the other two securities.   If you want to par your losses over this period, results show that the maximum gains came five days following opening day, pegging an exit point of around Wednesday of the first week of competition, and producing gains of 0.8% to 2.0% during this short timeframe.

Coca-Cola and McDonalds also benefitted from gains of just over 2% in the week leading up to the games, with around 53% of sessions producing gains.   General Electric, however, remained sluggish and was “market perform” over this timeframe.

The Bottom Line

The impact of the Winter Olympic Games comes primarily around the time leading up to and during the initial stages of the games (within the first week).   After that, the thrill wears off.   Optimal time to “buy-in” is the period leading up to the opening ceremonies and selling upon strength during the first week of competition.

We already may be seeing signs of history repeating itself.   After coming off of a bit of a rally on the day before opening, we are witnessing improving technicals on the Dow Jones Summer/Winter Games Index and a bottom appears to have been indicated.   According to the Dow Jones & Company, “the Index measures the performance of all publicly traded companies that are official partners, sponsors or suppliers of the current Olympic Games. The index is reviewed quarterly in March, June, September and December.”   If the current rally persists into mid next week within this benchmark, opportunities to sell at a gain may become apparent, before the market declines prior to the close of the games.

Dow Jones Summer/Winter Games Index

Chart courtesy of Google.com

Disclaimer: Comments and opinions offered in this report are for information only. They should not be considered as advice to purchase or to sell mentioned securities. Data offered in this report is believed to be accurate, but is not guaranteed.

Disclosure: Author does have position in General Electric (GE)

Stocks mentioned in this post: $DJI, $DJOLX, $SPX, GE, KO, MCD

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