The World Cup Has Kicked Off
This year’s FIFA event has drawn a lot of attention. From Qatar’s decision to ban alcohol to charging countries for insensitive chants, all eyes have been on it.
What has not been widely discussed is the impact on the stock market for World Cup host cities. In fact, equity markets for those countries have reliably outperformed peers.
According to data from Al Jazeera News, the stock market indexes of host countries for the last seven World Cups averaged 21.8% in the year leading up to the event and 13.4% in the year after, compared to average growth for world peers of 4.3% and 9.5% respectively.
Brazil, however, is a notable outlier, as its stock market declined 34.0% due to deteriorating economic conditions, a political crisis, and persistent inflation in 2014.
2022 has been a brutal year for equity markets across the globe, as we are all dealing with collective post-pandemic inflation, tighter monetary policy, and slowing growth leading to recessions in many countries.
Still, in the midst of the storm, the QSE Index (Qatar’s leading equity benchmark) was up over 20% at its height this year. While the Index is trading well off its highs (up +4.5% as of October 31), Qatar is still far outperforming global indices this year. If we take a much longer-term view back to 2010, when Qatar first began preparations for the event, the gap between the QSE and peers is even wider.
This relative outperformance is driven by a domino effect of increased domestic spending for the big event, leading to higher profits for local companies, which is reflected in higher stock prices.
Qatar has spent over $300 billion on infrastructure projects in preparation for hosting the World Cup. These projects include the subway system, roads, highways, and even a new airport.
As Qatar looks to beef up its infrastructure, developers benefit because many of their longer-term projects wrap up quicker, allowing them to book profits. Employees benefit as these large-scale projects create job opportunities. This is compounded as the actual event kicks off, with tourists flocking to the area and spending money.
As your equity and crypto portfolios continue getting decimated, it might be time to look outside of US equities for a slight glimmer of hope.
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