So much has been made of the World Cup being good for everything.
The benefits range from increased retail sales and a tourism boom to resurgent patriotism and national pride, even improved crop yields.
Few have been made about its less flattering side, so we say it here: the World Cup is bad for the stock market.
In the past five decades, just three of the 14 World Cup tournaments witnessed rallies in the world’s stock markets, according to Shanghai Securities Daily.
On average, the global stock market slid 1.65 percent during a World Cup month from 1958 to 2010, leading some enterprising analysts to coin the term “World Cup curse” to describe the phenomenon.
And get this: the global economy suffered an aggregate loss of US$10.4 billion during the 2010 South Africa World Cup, according to a research institute in Switzerland.
That can’t be too much off the mark. Banks, shops and factories close earlier than usual to allow workers to watch the matches on television.
And when a country is in contention, the risk to its stock market rises with the national team’s progress.
Germany, Argentina, Mexico, Spain, Italy and the Netherlands — perennial championship hopefuls — have had their share of bittersweet success.
To some extent, the actual loss in productivity can only be larger given the fact that no less than one billion people around the world watch TV or hit the internet to check out what’s going down. So, it will surprise no one if someone is caught by the boss watching the World Cup during office hours.
There is a way to explain the drop in stock market performance during the World Cup.
Some investors are football diehards themselves. Who would care about daily stock price movements when a once-in-four-years mega event is on?
Yes, the World Cup can be a booster to the economy of the host country but the effect begins to wane as the event winds down.
Bottom line: you can buy some wine, travel and F&B stocks when the World Cup kicks off, but you’d better sell them in a hurry in the next two weeks.
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