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Will Brazilian Stocks Benefit From the Summer Olympics?
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Smart investors should be looking for ways to make money on just about anything, and that includes events that are seemingly not related to the financial markets. With the Summer Olympics on the horizon, the world’s eyes will be on the Games in Rio, and that means investors’ eyes should be there too.
Past Trends
If we want to make money during this year’s Olympics, we first have to identify how the market has trended during past Olympic events. Interestingly enough, there appears to be a positive correlation between market activity and the Summer Olympic Games.
According to Investopedia, which traced market performance during the 26 Summer Olympics since 1900, the Dow Jones Industrial Average has gained an average of 4% between the opening and closing ceremonies of the Games. Overall, there have been positive returns during 68% of the Summer Olympics.
In recent years, performance has been mixed. During the London Games, the DJIA gained 2.5%, and the 2004 Games in Athens saw returns of 3.76%. On the other hand, the Beijing Summer Olympics, which were held in the midst of the 2008 financial crisis, saw the market lose about 1%.
It’s also important to note that host countries generally see gains that mirror that of the American markets. One exception to note is that the Shanghai Composite dove about 7.7% during the 2008 Games.
Conditions in Brazil
Of course, we also need to take a look at the economic conditions in Brazil at the moment. Those who have been keeping in touch with the South American nation in the lead up to these Olympics will know that Brazil has seen its fair share of economic and political instability lately.
In May, President Dilma Rousseff was suspended from her role to face impeachment on corruption charges. Just a few weeks ago, a conservative lawmaker who led the ouster of Rousseff was forced to resign from his position following accusations that he accepted up to $40 million in bribes. Long story short, the Brazilian government has been a bit of a mess over the last year or so.
More recently, however, there has been some improvements in the political climate. A couple weeks back, Acting President Michel Temer and Finance Minister Henrique Meirelles announced that the country’s annual deficit would be reduced in 2017. Brazil’s stock market hit an eight-week high in response to the news.
Some of Brazil’s major economic giants have been rebounding throughout the year as well. Shares of primarily state-owned oil company Petrobras (PBR - Free Report) have gained over 90% on the year, and the Brazilian portion of this BRICS motif is up 24% over the same timeframe. The custom fund, which is also up 28% over the past month, holds positions in Telefonica (VIV - Free Report) , TIM Brasil , CPFL Energia , Sabesp (SBS - Free Report) , Electrobras , CEMIG (CIG - Free Report) , and COPEL (ELP - Free Report) .
Tickers to Watch
For the most part, the Rio Olympics and the remaining political uncertainty should already be priced in to Brazilian stocks. With that said, there could be a few tickers that see a nice period of green during and after the Games.
First of all, investors that feel confident about the state of the Brazilian economy should check out the iShares MSCI Brazil Capped ETF (EWZ - Free Report) . This ETF uses a 25/50 capped methodology and tracks the overall performance of the equities market in Brazil. This ETF has been slowly gaining throughout July, and if the Rio Olympics go off without a hitch, it could continue to climb as a result.
Investors might also want to check out AmBev (ABEV - Free Report) , the Brazilian subsidiary of Anheuser-Busch InBev (BUD - Free Report) . AmBev is the biggest brewery in Latin America, and the company also distributes a large portion of PepsiCo (PEP - Free Report) products throughout the region.
This one comes from a simple idea; people love to drink, especially at major sporting events. Again, the Olympics are certainly factored into AmBev’s current price, but the continued economic recovery of Brazil could help boost this stock even further.
Bottom Line
While there has been plenty of instability in Brazil for some time now, it’s finally looking like the government and some of the major companies are turning things around. Investors should continue to look toward the Olympics as a unique investing opportunity. In the past, the markets have favored the Summer Games, and some stocks could be ready to take off.
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Will Brazilian Stocks Benefit From the Summer Olympics?
Smart investors should be looking for ways to make money on just about anything, and that includes events that are seemingly not related to the financial markets. With the Summer Olympics on the horizon, the world’s eyes will be on the Games in Rio, and that means investors’ eyes should be there too.
Past Trends
If we want to make money during this year’s Olympics, we first have to identify how the market has trended during past Olympic events. Interestingly enough, there appears to be a positive correlation between market activity and the Summer Olympic Games.
According to Investopedia, which traced market performance during the 26 Summer Olympics since 1900, the Dow Jones Industrial Average has gained an average of 4% between the opening and closing ceremonies of the Games. Overall, there have been positive returns during 68% of the Summer Olympics.
In recent years, performance has been mixed. During the London Games, the DJIA gained 2.5%, and the 2004 Games in Athens saw returns of 3.76%. On the other hand, the Beijing Summer Olympics, which were held in the midst of the 2008 financial crisis, saw the market lose about 1%.
It’s also important to note that host countries generally see gains that mirror that of the American markets. One exception to note is that the Shanghai Composite dove about 7.7% during the 2008 Games.
Conditions in Brazil
Of course, we also need to take a look at the economic conditions in Brazil at the moment. Those who have been keeping in touch with the South American nation in the lead up to these Olympics will know that Brazil has seen its fair share of economic and political instability lately.
In May, President Dilma Rousseff was suspended from her role to face impeachment on corruption charges. Just a few weeks ago, a conservative lawmaker who led the ouster of Rousseff was forced to resign from his position following accusations that he accepted up to $40 million in bribes. Long story short, the Brazilian government has been a bit of a mess over the last year or so.
More recently, however, there has been some improvements in the political climate. A couple weeks back, Acting President Michel Temer and Finance Minister Henrique Meirelles announced that the country’s annual deficit would be reduced in 2017. Brazil’s stock market hit an eight-week high in response to the news.
Some of Brazil’s major economic giants have been rebounding throughout the year as well. Shares of primarily state-owned oil company Petrobras (PBR - Free Report) have gained over 90% on the year, and the Brazilian portion of this BRICS motif is up 24% over the same timeframe. The custom fund, which is also up 28% over the past month, holds positions in Telefonica (VIV - Free Report) , TIM Brasil , CPFL Energia , Sabesp (SBS - Free Report) , Electrobras , CEMIG (CIG - Free Report) , and COPEL (ELP - Free Report) .
Tickers to Watch
For the most part, the Rio Olympics and the remaining political uncertainty should already be priced in to Brazilian stocks. With that said, there could be a few tickers that see a nice period of green during and after the Games.
First of all, investors that feel confident about the state of the Brazilian economy should check out the iShares MSCI Brazil Capped ETF (EWZ - Free Report) . This ETF uses a 25/50 capped methodology and tracks the overall performance of the equities market in Brazil. This ETF has been slowly gaining throughout July, and if the Rio Olympics go off without a hitch, it could continue to climb as a result.
Investors might also want to check out AmBev (ABEV - Free Report) , the Brazilian subsidiary of Anheuser-Busch InBev (BUD - Free Report) . AmBev is the biggest brewery in Latin America, and the company also distributes a large portion of PepsiCo (PEP - Free Report) products throughout the region.
This one comes from a simple idea; people love to drink, especially at major sporting events. Again, the Olympics are certainly factored into AmBev’s current price, but the continued economic recovery of Brazil could help boost this stock even further.
Bottom Line
While there has been plenty of instability in Brazil for some time now, it’s finally looking like the government and some of the major companies are turning things around. Investors should continue to look toward the Olympics as a unique investing opportunity. In the past, the markets have favored the Summer Games, and some stocks could be ready to take off.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>