How Will Equities Respond to England Winning Euro 2020?
- By Sam van de Schootbrugge and Suleiman Javid
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- 1 min read
The biggest European football tournament of 2020 has started – in 2021. France is the bookmakers’ favourite to win Euro 2020, but England could storm to victory. Of course, that the lead author supports England has nothing to do with this conclusion. Rather, England kicked off their 2020 campaign with a 1-0 win against 2018 World Cup runners-up Croatia. More importantly, England have a favourable head-to-head record against France at 17-9. So, it seems inevitable that the European Championship cup is coming home. The only question left for investors to answer, then, is how will equities perform on England winning Euro 2020?
To answer this, we revisit the stock market performance of each winner and runner-up since Euro 1996. Reassuringly, we find that equities in both finalist countries enjoy positive returns on the days before and after the final (Charts 1 and 2). The largest returns come the day before, with peak footballing delirium translating into positive stock market sentiment. The winner then enjoys a slight premium over the runner-up on the day following the final.
There is, however, some comfort in losing the final. Cumulatively, the runner-up gains most around Finals Day, and they are less likely to suffer an equity performance hangover. One week and one month after a Euros win, stock markets have on average been 0.7% lower (Chart 1). In contrast, runners-up maintain their tournament equity market gains and, if anything, see stocks rise further over a one-month horizon (Chart 2).
A country-by-country analysis provides yet more depth. France and Portugal were the favourites and eventual winners of the Euro 2000 and Euro 2016 championships. They bucked the winners trend by recording strong post-final equity performances beyond one week (Chart 3). Italy and Spain saw stronger-than-average equity performance in the lead up to the Euro 2012 final (Chart 4). Returns peaked on Finals Day and were followed by a larger-than-average decline.
Admittedly, many of these results are unlikely to be robust. Nevertheless, some European Championship equity market effect is evident for finalists in the days surrounding the final. Further out, the impact is negligible and likely outweighed by broader macro conditions. That said, England has never won the Euros, and large market moves are now the new norm. So, hold onto your hats, the largest upside to equity markets in coming months could be England winning the Euros!
Sam van de Schootbrugge is a Macro Research Analyst at Macro Hive, currently completing his PhD in international finance. He has a master’s degree in economic research from the University of Cambridge and has worked in research roles for over 3 years in both the public and private sector.