England Ashes wins and the stock market

In the latest of our ‘Odd Correlations’ series, and as England once again do battle with Australia at the spiritual home of cricket, I thought it interesting to look at the performance of the stock market in the wake of an England victory.

Sporting victories often act as a powerful boost to risk appetite, as a ‘feelgood factor’ comes into play. The phenomenon has been noted before, with earlier (and more comprehensive) studies noting that there was a clear correlation between football World Cups and periods of better performance in the stock market (see Sport Sentiment and Stock Returns, 2005).

English fans may not wish to be reminded of the Australians’ long period of cricket dominance, but there have been only three occasions when England has been victorious on their home turf since 1984, when the FTSE 100 came into existence.

However, what is comforting is the performance of the stock market in the wake of an England victory. The average rise in the FTSE 100 after England takes home the smallest trophy in world sport is 17.75%. The graph below shows the gain in 1985, 2005 and 2009.

6-month % return of the FTSE 100 after an England Ashes home win
6-month % return of the FTSE 100 after an England Ashes home win

Royal babies might only have a mixed impact on investor confidence, but it seems an Ashes win really lifts the spirits.

Lest anyone think that this is too small a data sample, I would also point out that the six months after the 2012 London Olympics saw a stock market gain of 10.46%, suggesting that there is perhaps a broader effect on optimism and risk appetite following major sporting occasions.

With the second test only in its early stages, it is difficult to tell who will be victorious in the current competition. Given the course of the morning’s play, it seems Australia has the upper hand, but the broad expectation is that England will win the series and retain the Ashes. A victory resulting in an average gain of over 17% for the stock market would see the FTSE 100 breeze past the 7700 level in the coming months. Perhaps that is a bit much, but we can at least hope an England victory gives the nation an added boost to confidence.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.