How FIFA World Cup correlates with the stock market
FIFA World Cup 2022 kicks off on Sunday, November 20, 2022, with the host country, Qatar, playing Ecuador. The FIFA World Cup is undoubtedly the biggest and most anticipated event in the world of sports. You may have heard of the “World Cup effect” when the excitement surrounding the event boosts tourism, jobs, and investment in the host country. Plus, it also give a major impact on the economy and the stock market as well.
Here's the correlation of FIFA with sales and trading.
As a result of the World Cup preparation, Qatar’s stock market performance increased by more than 50% over the course of five years.
“Given that the country is preparing for the World Cup for more than a decade, to focus on a short period of stock performance won’t be a fair reflection,” – Akber Khan, Senior Director of Asset Management, Al Rayan Investment (Doha-Based).
The stock market performance of the countries involved seems to be impacted by the euphoria of winning or losing the World Cup. So, in what ways does FIFA impact the stock market? It can be impacted either directly through sponsorship or indirectly, such as through behavioral economics.
The 2014 FIFA World Cup was watched by 3.2B people and the 2018 FIFA World Cup was watched by 3.572B people. The final 2018 match was seen live by a combined 1.12 billion viewers worldwide. Basically, more than half the world watched the record-breaking 2018 World Cup. It is likely for the viewership to replicate itself during the Qatar 2022 World Cup.
Time and attention are two scarce resources. In this context, we can see how fans allocate more of their attention to the games and less to invest. Their time and attention will be diverted to the match if those matches coincide with trading hours.
Not only that, relevant market news and events may not be as impactful and market reaction will likely be less active as lower liquidity may develop in the market.
Tech - Apps and Screens
As matches play out, the use of screens and apps increases. Some looking for instant live commentation on social media. Elon Musk highlighted that Twitter saw ‘almost’ 20,000 tweets per second during FIFA World Cup 2022 as of Wednesday, November 23, 2022.
It might be possible due to giant teams playing the Wednesday match, which consists of Morocco playing against Croatia, Germany vs Japan, and Spain vs Costa Rica. After Musk’s sudden firing event after taking over the company, he thanked the team for “managing record usage.”
Analysts are speculating that this could lead to a much-needed lift for tech stocks. According to a YouGov survey, during FIFA World Cup 2018, 70% of fans read sports event-related posts on Facebook, while 52% watched highlighted matches clips on Instagram Stories.
This highlights a great opportunity for the digital advertising and commerce sectors. The events will provide a great opportunity for companies that specialize in digital ads, especially for social media platforms.
Twitter might be a good stock to look at, however, the stock had been delisted on November 8, 2022. Other high-traffic platforms to look at are Google (NYSE:GOOG) and Meta (NYSE:META). Both companies are the market maker in digital ads and might have a boost from the event.
<Read: The Battle of Digital Ads Giants>
The legendary FIFA series is a series of association football video games developed and released annually by Electronic Arts (NYSE:EA) under the EA Sports label for over 20 years, and is now the largest sports video game franchise. The series will be known as EA Sports FC from 2023. The video game could see and usage increase during FIFA 2022.
During the World Cup, many e-commerce sites will get sales to boost as people tend to purchase a new football team jersey, sports attires, and many more. E-commerce companies like Amazon, Alibaba, and eBay might be beneficial.
(as at the time of writing)
Nevertheless, since the start of the 2022 World Cup, directly impacted by sales will be the giant sports attire Nike (NYSE:NKE), which is the largest kit sponsor rose 0.34% while Adidas, on the other hand, dropped 0.082% while Puma the 3rd largest kit sponsor fell by 0.67%.
Football is a social activity, often involving gatherings, food, and drinks. Food such as burgers and pizzas which are often chosen as match-viewing favorite food, along with FIFA partners like Coca-Cola (NYSE:KO) and McDonald’s (NYSE:MCD) might see sales boost.
Not only that, food delivery services will only benefit from it. For instance, the Chinese app Meituan saw food orders jump by 40% in the 15 minutes preceding the first 2018 World Cup match.
Meanwhile, in the UK, according to Bloomberg, an analyst from Citigroup predicted a boost in sales from food-delivery firms such as Just Eat and Deliveroo, as many fans may opt to order food right from their living room.
The outcome of the World Cup is connected to how investors respond to the stock market activity. Basically, if the team you are supporting lost in their match, it will be affecting your mood. Thus, this will spill over to the stock market price.
On the other hand, researcher found that a goal scored by either team reduced the number of trades by another 10%. This is due to the attention span having shifted towards the goal. As the loss affects the misery it causes for the losing team investor fan may wear off a lil longer. It usually takes between ½ to an hour after the match for trading momentum to return to normal.
An opportunistic investor might take the events as an opportunity to ride the wave of liquidity drop and purchase at discount and place their strategies for future price movements of correspondent companies during these times.
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