With the World Cup set to kick off this week, investors should probably keep their eyes on the pitch rather than the market if they’re looking for joy.
For our “just for fun” file, we decided to take a look at the performance of the US equity market during the international soccer tournament. During the span of the World Cup, the US equity market has averaged a decline of 1% when measured from the day before the first game to the day after the final game. Median returns are less negative, a decline of 12 bps. Half the tournaments have resulted in gains, while the other half have seen losses. Those declines aren’t the end of the world, of course, but the average period of similar length throughout World Cup years has seen a gain of 43 bps on average and 1.03% median, with gains 57% of the time. We show returns by year of the World Cup below.
As shown in the chart below, the 2018 equity market is starting out from a much more advantageous position than the historical average. On average when the World Cup has started historically, the US equity market has already been in a significant drawdown.
We want to emphasize that this analysis isn’t meant as a way to beat (or lag) the market; while historical analyses are often very helpful, World Cup underperformance are almost certainly a function of random noise.