With half the world’s population expected to be watching football this week, it seems wrong to completely ignore ‘the beautiful game’ so, what’s it got to do with finance? Well apart from the cost of hosting the event studies have shown that during large sporting events stock markets are affected.
All other things being equal you can expect stock and other investment markets to be more volatile than at other times of the year. A cynic may say that this is because traders are concentrating more on the football than on finance but those of a more generous disposition would say that it is because there are more traders on holiday at that time and so trades on the markets are done less frequently and in larger deal sizes. This creates a choppy market. There is also a noticeable feel good factor based on how well a country’s team is doing.
Brazil has spent significant amounts on hosting the World Cup at a time when its economy has been suffering with high interest rates, inflation and high levels of unemployment. Despite the love of football in Brazil, some have questioned the rationale of spending so much on a sports event. Hopefully, Brazil will shine in the days to come and the event will showcase the country at its best generating more international trade and it will improve the economic prospects for its citizens.
In this tournament our household has an interest in three competing countries: England, Germany and Switzerland. Luckily in the group stages none of these teams will be competing against each other.
If you have any questions or comments please contact me either by leaving a comment , email or phone.