ETFs and the Olympics: Trade-Worthy Opportunity?
In just eight days, the Summer Olympics commence in London. Regardless of Great Britain's medal count, it is clear being the host nation for major international sporting competitions does provide an economic benefit to that country.
As far as ETFs are concerned, there are plenty of choices for Summer Olympics exposure. That is just the corporate nature of sports these days.
Traders looking for more actionable ideas would do well to commit to some homework and look at the performances of various country ETFs after those nations hosted the Olympics. In other words, some quick research can confirm dispel the notion of an "Olympics Effect." And do not worry about the research, it is provided here.
Atlanta 1996 In this case, the best ETF to look is the SPDR S&P 500 (NYSE: SPY). SPY first burst onto the scene in 1993, so it was somewhat seasoned by the time the 1996 Summer Olympics rolled around. Those games ended on August 4, 1996. From August 9 through December 27, 1996, SPY, now the world's largest ETF by assets, jumped 14 percent.
The Olympics may have contributed to SPY's good fortune, but it is unlikely the games were the driving force behind the ETF's returns. A bull market for stocks and a presidential election year probably meant more to SPY in 1996 than the Olympics did.
Sydney 2000 Talk about disappointing. The closing ceremony for the 2000 summer games was on October 1, 2000. From October 6 through December 29, 2000, the iShares MSCI Australia Index Fund (NYSE: EWA) was flat. Six months after the closing ceremony, EWA was down nearly 13 percent.
Nagano 1998 The iShares MSCI Japan Index Fund (NYSE: EWJ), the largest ETF tracking the world's third-largest economy, was around for the 1998 Winter Olympics, but the fund did not benefit much. EWJ fell 7.1 percent from a few days after the closing ceremony in late February 1998 through the year-end. In defense of EWJ, that decline arguably had more to do with the residual impact of the 1997 Asian financial crisis than the Olympics.
Turin 2006 These were certainly more sanguine times for Italy and the iShares MSCI Italy Index Fund (NYSE: EWI). Still, hosting the 2006 Winter Olympics did not do much for that ETF. EWI was trading around $15.60 immediately following the closing ceremony. By the end of the year, EWI was hovering around $14.60. That is still more than $4 better than where the downtrodden ETF closed on Wednesday.
Beijing 2008 Thanks to the global financial credit crisis, there was no post-Olympics bounce for the iShares FTSE China 25 Index Fund (NYSE: FXI), at least not immediately following the games. The closing ceremony was held on August 24, 2008. From August 28, 2008 through the end of the year, FXI lost 32.2 percent.
Vancouver 2010 The iShares MSCI Canada Index Fund (NYSE: EWC), the largest Canada-specific ETF, is the brightest spot among ETFs tracking Olympics host nations. After Vancouver hosted the 2010 winter games, EWC proceeded to surge 19.6 percent from early March 2010 through the end of the year.
Bottom line: With the U.K. in a recession, the Olympics will provide some much-needed stimulus to the economy there. That is almost a sure bet, but betting on a rally for the iShares MSCI United Kingdom Index Fund (NYSE: EWU) looks like a dicier proposition.
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