For investors looking for ways to make their money work hard during the upcoming football World Cup, it might seem like common sense to invest in the host country, given the economic benefits from people spending on travel, hotels, food and drink, and infrastructure upgrades to put on the games.
But in fact, when we look back at the historical data, people may want to think again.
New analysis by AJ Bell found that investing in funds tracking the host country’s stock market delivered a worse return on average than backing the two sides which reached the World Cup final since 1990. In fact, the runner-up proved to be the best investment of the pair, on a total returns basis.
We analysed performance data for tracker funds related to each World Cup host country, winner and runner-up and compared performance based on where you had bought each relevant fund the day after the World Cup final and sold on the day before the next tournament began four years later.
Investing in the second-place country for the relevant four-year periods between 1990 and the present day would have returned 61% on average. In comparison, investing in the winner produced a 59% average return versus just 27% from the host country.
Returns were much more consistent among World Cup second-place countries, whereas the average return for the hosts of the past nine tournaments were skewed by a blockbuster showing from the US stock market after the 1994 event.
The results counter common wisdom and highlight the potential benefits of going against the crowd. That’s something many people find to be the winning strategy with investing in general, and is a practice applied by some fund managers or more experienced investors looking to beat the market.
Ways to invest in competing countries in this year’s World Cup
The latest betting odds put France in second place, against Spain as the winner and the US as the host country. France has come in second place twice over the past nine World Cup tournaments, won it twice, and hosted once.
There are various tracker funds mirroring the performance of key equity indices in France. For example, iShares MSCI France ETF follows the MSCI France index used in our calculations and covers 54 companies including luxury goods specialist LVMH and aircraft manufacturer Airbus.
Amundi CAC 40 ETF tracks the CAC 40 index which contains 40 of the most prominent companies on the French stock market. The list includes cosmetics group L’Oréal and insurer Axa.
But of course, any investment decision comes with risks and should be assessed based on wider economic data and market valuations rather than simply who is expected to finish first or second at a sporting event. Investors may find that investing in the US or Spain might prove a better fit with their portfolio than France, or even that Brazil or England (the UK) could be worth exploring, so it’s important to make any decision with the appropriate level of research before committing money to it.
Other examples of funds tracking the markets of different countries include Amundi IBEX 35 ETF for Spain, iShares Core S&P 500 ETF for the US and iShares Core FTSE 100 ETF for the UK. For investors seeking broader global exposure rather than just individual countries’ markets, global tracker funds such as Fidelity Index World might be a good place to start.
Stocks to watch: IHG, Adidas, JD Sports, ITV and Flutter
Anyone looking for specific World Cup-related opportunities might want to consider a different approach and focus on certain sectors related to the tournament.
As mentioned above, areas like travel, accommodation, hospitality, sportswear, media, and gambling are the obvious hotspots, but none are guaranteed winners.
It's always is vital to drill down into each sector to understand which stocks would have the most exposure, rather than simply picking anything from that industry. For example, Whitbread is a well-known hotel operator, but it wouldn’t benefit from the World Cup because it doesn’t have sites in the host countries. In contrast, InterContinental Hotels has sites in all three of the World Cup locations this year: the US, Canada and Mexico.
When looking at investment opportunities, it’s important to consider the negatives as well as the positives. There are reports that hotel bookings in host cities are below expectations because of high match ticket and travel costs. That suggests hotel operators such as IHG aren’t guaranteed to score big from the World Cup.
A lot of attention is placed on sportswear during major events such as the World Cup. Adidas has ploughed a reported £50 million into its World Cup advert starring Timothée Chalamet, Lionel Messi, Lamine Yamal, Jude Bellingham and a host of other big names.
Adidas is hoping the buzz around the advert will put its brand front of mind for sports fans and translate into mega sales of its footwear. JD Sports is one to watch in this context, given it is a major retailer of Adidas products in both the UK and US.
Big sporting events like the World Cup attract millions of eyeballs, which is precisely why companies like to spend big on advertising during televised matches. Broadcaster ITV is showing 51 premium live matches and could see a big boost to advertising-related income around the event.
Flutter is a major name in sports betting and has operations in various parts of the world, meaning it is well placed to benefit from people looking to put a wager on the World Cup. The big unknown is how much money that traditionally might have gone to betting companies for the tournament will now be redirected to prediction markets dominated by Polymarket and Kalshi.
Dan Coatsworth: Head of Markets
Dan Coatsworth is AJ Bell's Head of Markets. Dan has been with the company since December 2012 and has more than 18 years' experience in the industry, following the markets and all things investing. He...
