Sunday’s World Cup result certainly gives Spain a lot to cheer about. After decades of faltering on soccer’s biggest stages, the defending European champions are bringing home their second consecutive major international title and the country’s first World Cup title.
But is this good news for a downtrodden economy marked by the highest unemployment rate in the Eurozone? That’s a hard question to answer at this point, but if history is any guide, the World Cup title could be a boon for the iShares MSCI Spain Index (NYSE: EWP).
In 2006, the iShares MSCI Italy Index (NYSE: EWI) was trading around $28 when the World Cup started. A month after Italy won the title, EWI was over $30. By the end of 2006, EWI was close to $33.
Of course, there are no guarantees that this scenario will repeat and 2006 saw a much different market environment than what we’re dealing with today.
What about the losers? Is the iShares MSCI Netherlands Investable Market Index (NYSE: EWN) in for tumble after that country fell to Spain in the final? Not necessarily.
France lost to Italy on penalty kicks in the 2006 title match, but the iShares MSCI France Index (NYSE: EWQ) actually went on to sharply outperform EWI by a wide margin for the rest of 2006.
The moral of the story is don’t buy a country-specific ETF simply because that country’s soccer team is good.
