World Cup begins, host country scores!

by: , Director and Portfolio Manager, New York Life Investment Management

“Some people believe football is a matter of life and death. I’m very disappointed with that attitude. I can assure you it is much, much more important than that.” Bill Shankly – Former English Soccer Manager

The 2018 FIFA World Cup kicks off on Thursday, June 14 with a match between the host country Russia and Saudi Arabia. Neither country are favorites to win the Cup, but for Russia, hosting the event has an interesting effect!

Host country impact

Mega events like the World Cup are expected to be a net positive for the host country’s economy, which is likely to benefit from a boost in tourism, employment, consumption, and infrastructure measures, among other things. According to a study from the tournament’s organizing committee, the soccer World Cup could boost Russia’s gross domestic product (GDP) by 150 billion to 210 billion rubles ($2.43 billion-$3.40 billion USD) per year over the next five years. The study said that the World Cup added 867 billion rubles to Russia’s GDP between 2013 and 2018.1 Another study from the Boston Consulting Group (BCG) highlighted that a tri-nation North American bid to host the 2026 soccer World Cup could create over $5 billion in short-term economic activity in the region, including supporting approximately 40,000 jobs and more than $1 billion in incremental worker earnings.2

The better growth prospects and a positive sentiment around the host nation generally helps boost the local equity markets. For the most recent seven World Cups, for which we had the data available, on average, the equity markets of the host country returned 21% in the year prior to the start of the event, and outperformed the MSCI World Index by 13%.

World Cup host country’s equity market one-year performance prior to the start of the event

S. No. Host Nation Host Country Stock Index Event Start Date Host Country Index One-Year Performance MCSI World One-Year Performance Host Country Index Outperformance
1 Russia MOEX Russia Index 6/14/18 29.8% 13.8% 16.0%
2 Brazil BRAZIL IBOVESPA INDEX 6/12/14 12.0% 21.5% -9.4%
3 South Africa FTSE/JSE AFRICA TOP40 IX 6/11/10 17.2% 11.2% 6.0%
4 Germany DAX INDEX 6/9/06 19.8% 14.4% 5.4%
5 South Korea/Japan KOSPI INDEX 5/31/02 32.9% -12.2% 45.1%
South Korea/Japan NIKKEI 225 5/31/02 -10.6% -12.2% 1.6%
6 France CAC 40 INDEX 6/10/98 61.9% 18.4% 43.5%
7 United States S&P 500 INDEX 6/17/94 5.1% 9.5% -4.5%
Average: 21.0% 8.1% 13.0%

Source: NYLIM, Bloomberg, as of 6/13/18. Past performance is no guarantee of future results. It is not possible to invest directly into an index. Definitions can be found at the end of this post.

So far, we have seen impressive performance from the equities in the 2018 host country Russia, with the MOEX Russia Index up almost 30% in the last one year in local currency.

MOEX Russian Index

Source: Bloomberg, as of 6/13/18. Past performance is no guarantee of future results. It is not possible to invest in an index. Definitions can be found at the end of this post.

More to come

Stock markets react differently to the announcement of the tournament, but a sporting event of this scale is bound to have some impact on world economies and the financial markets. Stay tuned for more insights and commentary on the World Cup as the excitement unfolds.

1. https://www.reuters.com/article/us-russia-economy-worldcup/world-cup-may-boost-russia-gdp-by-150-210-billion-rubles-per-year-organizing-committee-idUSKBN1HW0UU

2. https://www.reuters.com/article/us-soccer-worldcup-2026-usa/north-american-soccer-world-cup-would-create-5-billion-in-economic-activity-study-idUSKBN1FS30X

Opinions expressed are current opinions as of the date appearing in this material only. The information and opinions contained herein are for general information use only. New York Life Investments does not guarantee their accuracy or completeness, nor does New York Life Investments assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, and are not intended as an offer or solicitation with respect to the purchase or sales of any security or as personalized investment advice. There can be no guarantee that any projection, forecast, or opinion in these materials will be realized. Past performance is no guarantee of future results.

About Risk

All investments are subject to market risk, including possible loss of principal. There is no assurance that the investment objectives mentioned will be met. Diversification cannot assure a profit or protect against loss in a declining market.

The Bovespa Index (Portuguese: Índice Bovespa) best known as Ibovespa is the Benchmark index of about 60 stocks that are traded on the B3.

The CAC 40 (French: CAC quarante [kak kaʁɑ̃t]) (Cotation Assistée en Continu) is a benchmark French stock market index. The index represents a capitalization-weighted measure of the 40 most significant values among the 100 highest market caps on the Euronext Paris (formerly the Paris Bourse).

The DAX (Deutscher Aktienindex (German stock index)) is a blue chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. Prices are taken from the Xetra trading venue.

The FTSE/JSE Top40 Index is a capitalization weighted index. Companies included in this index are the 40 largest companies by market capitalization included in the FTSE/JSE All Shares Index. The index was developed with a base value of 10399.53 as of June 21, 2002.

The Korea Composite Stock Price Index or KOSPI (코스피지수) is the index of all common stocks traded on the Stock Market Division—previously, Korea Stock Exchange—of the Korea Exchange. It is the representative stock market index of South Korea, like the S&P 500 in the United States.

The MOEX Russia Index (Russian: Индекс МосБиржи; formerly MICEX Index) is the main Ruble-denominated benchmark of the Russian stock market.

The Nikkei is short for Japan’s Nikkei 225 Stock Average, the leading and most-respected index of Japanese stocks. It is a price-weighted index composed of Japan’s top 225 blue-chip companies traded on the Tokyo Stock Exchange. The Nikkei is equivalent to the Dow Jones Industrial Average Index in the United States.

The Standard & Poor’s 500, often abbreviated as the S&P 500, or just the S&P, is an American stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ. The S&P 500 index components and their weightings are determined by S&P Dow Jones Indices.

New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, New York 10010, provides investment advisory products and services. NYLIFE Distributors LLC is located at 30 Hudson Street, Jersey City, NJ 07302. NYLIFE Distributors LLC is a Member FINRA/SIPC.

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Amit Soni, CFA

Director and Portfolio Manager, New York Life Investment Management

Amit Soni is a Director and Portfolio Manager in the Strategic Asset Allocation & Solutions (SAS) team at New York Life Investment Management. He focuses on quantitative and macro-economic investment research and portfolio management for the asset allocation

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