Globetrotters are already converging on Rio de Janeiro, Brazil for the 2016 Summer Olympic Games, but investors shouldn’t get their hopes up for an economic boost to Brazilian stocks and country-specific exchange traded funds.
Even if Brazil were not plagued by the myriad of things going wrong for the Olympic Host, such as contaminated water at venues, rising crime rates and the Zika virus to name a few, the economic boost to the host country of an Olympic Games may not translate to any significant investment gains over the short-term.
Over the past eight Summer Olympics, starting with the Los Angeles Games in 1984, the local index of the host country rose in value six, or 75%, of the time through the two-week period, according to FactSet data.
The average percentage change of the local index from start to end of the Games was 1.8%, which matched the average percentage change of the MSCI World Index during the eight Summer Olympics.
SEE MORE: Is it Time to be Bearish on Brazil ETFs?
This suggests that investing in the local index at the start of the Summer Olympic Games and selling after the event ended has not been a good way to outperform the global benchmark. Investors would probably do just as well as holding a broad MSCI World Index fund as investing in Brazilian stocks during the Olympics.
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