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FIFA World Cup 2014 and stock market patterns

by Ashraf Laidi

Regardless of the S&P 500's performance during each of the last thirteen FIFA World Cup tournaments, the index ended up rallying by at least 30% either immediately after the tournament, or within three months from the final match.

Negative performance during the World Cup

  • 9 of the last 13 World Cup tournaments elapsed during a period of falling stocks, with an average decline of 6% from the first to final match.
  • 2 World Cup tournaments progressed during rallying markets, while 2 occurred with little signigicant change in the market.

Typical October rallies

  • In 7 of the last 13 World Cups (1962, 1966, 1974, 1986, 1990, 1998 & 2002), stocks started rallying in October to gain an average of 63% over an average period of 24 months.
  • The 1978 tournament was followed by rallies starting in November.

Interruption is necessary

  • Global indices have never rallied during a World Cup tournament and gone on to gain thereafter.
  • In 5 of the 9 tournaments coinciding with failing equities, the sell-off continued until reversals emerged in October or November.

Conclusion

Whether equities end up falling from today's opening match to the final championship game, post-World Cup sell-offs have usually bottomed in October. This may coincide with the end of the Fed's tapering.

But, with the Yellen Fed having succeeded in separating the end of tapering from the start of rate hikes, markets are likely to shift the focus into the start of rate hikes, which are unlikely to occur before end of Q2 2015.

After all, the S&P 500 has rallied for three straight weeks. The next four weeks may well be just the opportunity for letting off steam in Brazil.

world cup table, june 12

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