LONDON – Winning the soccer World Cup can bring instant rewards to that country’s stock market investors. But they better be quick, as the post-victory rally doesn’t last long.
That’s the conclusion of investment bank Goldman Sachs, which published a wide-ranging report on the World Cup and its economic impact.
Goldman Sachs analysts found a clear pattern of outperformance by the winning team in the weeks after the World Cup final.
On average, the victorious country’s stocks outperform the global market by 3.5 percent in the first month, the investment bank’s strategy team said.
The conclusions are based on statistics since 1974, when West Germany beat the Netherlands, and appear to be fairly consistent over time.
Only Brazil failed to outperform after its win in 2002, largely because the soccer-mad nation was consumed by recession and a currency crisis.
In the absence of a severe economic crisis, the winner tends to enjoy the spoils of success in the markets for a brief period at least, said Peter Oppenheimer, Goldman Sachs’ chief global equity strategist, in the report published late Tuesday.
A notable exception was Spain, whose stock market rallied 5.7 percent in the month after the national team won in 2010 its first World Cup – even though the country, along with many of its peers in Europe, was in the midst of an economic and financial crisis.
Investors should be careful, however, not to think that such euphoria will yield longer-lasting gains.
Sentiment can only take you so far, in markets at least – the winning nation doesn’t tend to hold on to its gains and, on average, sees its stock market underperform by around 4 percent over the year following the final, Oppenheimer said. The message seems to be: Enjoy the gains while they last.
The 32-country World Cup kicks off in Brazil on June 12.