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In our Ask the Analyst series, Spaceship community members send in their questions about investing.

“How do big events like the World Cup impact the market?”

We asked our in-house investment expertise at Spaceship and eToro.

Here’s what Josh Gilbert, Lead Analyst APAC and Middle East at eToro and resident English football fan, has to share with us.

Over to Josh:

“How does the World Cup impact the market?

With World Cup fever in full swing, I’ve been enjoying getting stuck into the crossover between football and finance in recent weeks.

As an Englishman who went over to Germany to watch his country play at the Euros in 2024, I'll be following this one with plenty of hope.

The honest answer is, the World Cup doesn’t really affect stocks in a big way, but it does have some impact.

The scale of a modern tournament is enormous, with this tournament the longest ever, with a record 48 teams participating. FIFA estimates it could add up to USD$40.9 billion to global GDP and draw 6.5 million attendees across the US, Canada and Mexico. Whether the final numbers match the projections is another question. Host city hotel bookings have been tracking below early expectations, while ticket, travel and accommodation costs have become a sticking point for some travelling supporters.

For the countries involved, the prize isn’t necessarily the tournament itself, but the attention it brings. A strong run in the tournament puts a country in front of a global audience, generating exposure that no tourism budget can replicate. It builds tourism interest, strengthens national branding. The follow-on is how it can accelerate investment in hotels, airlines, experiences, retail, and the wider consumer economy.

Morocco is a clear example of that first-hand. They reached the semi-finals in 2022 and in 2023, the country welcomed 14.5 million visitors, up 34% from the year before. Football was obviously not the sole driver, but the result clearly helped keep Morocco on the global stage. The tourism and consumer spending that followed had an impact well beyond the final whistle.

When you look across tournaments, equity markets mostly shrug off the results. A win rarely gives a country's market a lasting lift, and the same goes the other way when a team crashes out.

What's really driving returns is the boring stuff, interest rates, earnings and growth, none of which care what happens on the pitch. But losing hurts a little more than winning helps, and data shows that defeats can weigh on investor sentiment a little more than wins lift it.

The bigger pattern is that people simply stop trading when the game is on. Volume drops noticeably on match days across the world, with Latin America leading the way as trading activity falls around 26% on Match Days vs its previous 30-day average, according to data from Bloomberg Intelligence. Volumes also thin out the deeper a country goes, which makes sense given the rising stakes. Occasionally, a result really does move the needle, with Argentina's 2022 win the standout as the local market rose 4.5% the next trading day amid the national celebrations, but moments like that are the exception rather than the rule.

There's also the gear itself, where the World Cup is effectively the biggest retail moment in sport for the kit makers. The big three, Adidas, Nike and Puma, are dressing 37 of the 48 teams between them. And yet lifting the trophy doesn't lift the kit maker's share price. Going back to 1998, the brand behind the winning team has only once been the best performing of the three in the World Cup year itself.

So what does that mean for Australian investors? Realistically, very little changes in the market.

The Socceroos have already given fans something to shout about with that 2-0 win over Türkiye to open the campaign, but as good as it was to watch, a deep run won't move the ASX and a group-stage exit wouldn't dent it either.

Where it's worth paying attention is the consumer side, with the brands that benefit from fans spending locally through watch parties, food delivery, streaming subscriptions, hospitality and merchandise. That could be the broadcasters carrying the tournament, the payment providers processing all that activity or the consumer names with global exposure to the spending bump.

The investor takeaway is: enjoy the football, but don't let it drive your decisions, because it's time in the market, not timing the market, and the World Cup won’t do much to influence the stocks you own. And remember, this year, football really is coming home."

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Josh Gilbert

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