The Sportico Sports Stock Index closed August at its highest level since the end of 2021, as a belief that interest rates will be cut and boost consumer spending in what is already a strong economic climate lifted sports betting and entertainment stocks.
“With GDP running at 3.3%, the economy appears to be [firing] on all cylinders, and it should be a boost of confidence to markets that most of the tariff angst was misplaced earlier this year,” Chris Zaccarelli, chief investment officer of Northlight Asset Management, said. “However, markets have already priced in a September rate cut and it is important that the inflation data remains restrained between now and then … [but] the bull market is alive, and well and it will take a meaningful catalyst—such as a recession—to derail it.”
The stock market has been feeling especially bullish for over a week, since Federal Reserve chairman Jerome Powell gave a speech in Jackson Hole, Wyo., telegraphing that the central bank cares more about employment levels than inflation—suggesting the Fed will probably cut interest rates a quarter of a point in September. Cutting rates typically helps employment and consumer spending, while raising rates would be a tactic to counter rising costs caused by Donald Trump’s tariffs. The day of Powell’s speech, the Sportico Stock Index jumped 2.7%, reversing what had been a down month for the benchmark sports index.
For the month, the sports index outpaced the S&P 500 index and closed the month up 2% at 1,550, its highest month-end mark since December 2021. Most sports betting stocks improved in the month, with Rush Street Interactive (RSI) leading all 40 index stocks with a 43% rally in August. Rush Street continued to enjoy momentum from its end-of-July earnings report, which showed strength in Latin America and in online casino technology that allows players to also place sports bets while playing poker, for instance.
Sports data and analytics’ Genius Sports (GENI) was the second-best performer, adding 24%. Early in the month the company reported quarterly revenue was up 25%, led by a 30% gain in betting technology, content and services, its largest division contributing nearly three-quarters of sales. Genius said more bets, better pricing on contract renewals and more customers electing value-added services led to the gains.
Overall, 35 of the index’s 40 companies advanced in August, nine of those of 10% or more.
Despite the overall positive performances, there were some sharp decliners in the month, led by Vivid Seats (SEAT), which shed 48% of its value. That came even as the company did a 20-to-1 reverse stock split to prop up its share price early in the month. Vivid’s closing price of $16.92 is the equivalent of $0.85 a share last month. In its quarterly earnings call on Aug. 4, Vivid noted sports ticket sales were down double digits in its second quarter, thanks in part to underwhelming playoff matchups in the NBA and NHL.
Also struggling with wrong-way momentum was Under Armour (UAA). Its shares lost 27% in August to fall to a 15 year-low of $5.01. Thought the market has largely brushed off tariff fears with most companies, tariffs were mentioned 25 times on Under Armour’s August earnings call, as management said the Trump taxes will bring a $100 million hit to the business by year’s end. Under Armour is doing its best to paint the tariff hurdle as an opportunity to raise prices for the longer term. “The company is already embedding pricing power into product redesigns and premiumization efforts to offset near-term headwinds,” Jefferies analyst Randal Konik said in a research note.
While Wall Street is generally sounding bullish over stocks heading into the fall, it’s worth noting September is historically the worst month for equities, with the S&P 500 index falling on average 0.7% in the month over the last 75 years, according to Adam Turnquist, the chief technical analyst at LPL Financial. Generally, summertime lends itself to Wall Street pros embracing good news and ignoring the bad, something that tends to shift as vacations end with the Labor Day weekend. In the five years since the Sportico Sports Stock Index was formed, it has declined in three of the Septembers.
The Sportico Sports Stock Index is a basket of 40 stocks that rely on sports for a significant portion of future growth. The index includes sports teams and leagues such as Carabao Cup also-ran Manchester United (MANU, up 3%), broadcasters like recently purchased Paramount Skydance Corp. (PSKY, up 10%) and union-battling concessionaires like Aramark, (ARMK, down 9%). The index is equal weighted, meaning each stock starts off as 2.5% the value of the overall benchmark. Every three months the components are reset to 2.5% weighting with stocks dropped and added as needed at those times. To be included in the index, stocks must be traded in the U.S. with sufficient daily volume and a market capitalization greater than $50 million. The index was launched in August 2020 at 1,000.
