How World Cup fever mirrors financial market buoyancy. Every four years, everyone suddenly becomes an expert on football/soccer…you know, the beautiful game!
One of the more curious things about World Cup fever infecting the planet is the sudden authority by which previous novices now espouse their views and share colourful commentary on a sport that hasn’t been of interest for the prior three years and 48 weeks. For four sweet weeks every four years, we capture the zeitgeist* of the moment and in the case of Germany being knocked out early this World Cup, schadenfreude**. But as I reflect on the past few weeks, dear reader, I also see some parallels to financial market wisdom being spouted during moments of buoyancy. The number of financial “experts” and “thought leaders” has multiplied recently, and it’s possible that some of them don’t know what they are talking about.
For example, young people are being enticed to build their future nest egg by “investing in where the world is going” (not where it’s been). Just buy the FANGs (Facebook, Amazon, Netflix, Google) or is it FATS, or FAAMG, or FAANGs? More like FOMO (fear of missing out) if you’ve seen the valuations of these stocks recently. I can’t say if they are “cheap” or “expensive” but I do suspect that expectations of future success is baked into the price. That’s more-or-less how equity pricing works, but nonetheless share market tips just keep coming from the young kids. At least they are trying to make the world a better place. If Gordon Gekko~ was a millennial, then he might say, “Blue Horseshoe would like Anacott Steel very much, if only management focused more on Environmental, Social and Governance issues.” Apparently 20-somethings have even figured out a way to disrupt the World Cup – 58% of under 30’s admit to illegally streaming games.
The other day a taxi driver spent half of my journey telling me why VAR (video assistant referee) is ruining the World Cup and destroys the “purity of the game”. He then spent the other half of the time explaining how an inverted yield curve is a sure-fire predictor of a recession. You have to admire the breadth of topics a cabbie can cover in a short span of time!
My brother in-law tipped Uruguay to go all the way this World Cup, if only they can keep their “midfielders well-organised” and then told me that Tesla will quadruple in value if only they can “control their cash burn”. You can’t make this stuff up.
My uncle loves the talent on display by the French, but is also concerned that low unemployment isn’t feeding through to higher wages. The Phillips Curve has got nothing on Benjamin Pavard’s curving strike during France’s thrilling victory over Argentina. This is getting silly.
Hand of God or not, apparently Maradona has let himself go in recent years…but so has the price of a cup of coffee in Venezuela. According to the “lady in the lift”, hyperinflation may spread to the developed world given all the central bank printing and something about chickens coming home to roost (whatever that means).
Even YouTube’s algorithm has gotten in on the act – suggesting I next watch “10 times Lionel Messi OWNED Cristiano Ronaldo” followed by “7 times Pelé went BEAST MODE”. Of course this was followed by a video titled, “How I made $830 profit in 45 mins trading credit default swaps”.
Not to put too fine a point on it, but these are red flags, people! Or shall I say red cards? Anyway, apart from these ramblings there are some universal truths here to consider:
The “Lucky Country” was decidedly “Unlucky” lamented Australia’s coach, Bert van Marwijk, after crashing out in the knockout round; sometimes you need a bit of luck (in football and investing)
Markets go up, markets go down; interest rates fluctuate; don’t buy risk at the wrong price
Neymar is a world-class player and an even better flopper (#NeymarRolling)
Asset allocation is still the most important decision you will make (and believe me this is an active call)
England will likely get knocked out on penalties
Finally, don’t listen to the “experts” (especially me) and use sophisticated data analytics and quant tools to cut through the increasing amount of “noise” out there, especially as this cycle extends.
Trust me, all this free advice will help you keep your wits about you over the next four years, by which time we’ll once again be pontificating the virtues of ball control/possession vs. direct style (i.e. long passes and through balls) and reminiscing about the last big market correction that we should have seen coming.
* the defining spirit or mood of a particular period of history as shown by the ideas and beliefs of the time
** pleasure derived by someone from another person's misfortune
~ a character from the movie Wall Street
This material has been prepared and issued by First Sentier Investors (Australia) Limited (ABN 89 114 194 311, AFSL 289017) (Author). The Author forms part of First Sentier Investors, a global asset management business. First Sentier Investors is ultimately owned by Mitsubishi UFJ Financial Group, Inc (MUFG), a global financial group. A copy of the Financial Services Guide for the Author is available from First Sentier Investors on its website.
This material contains general information only. It is not intended to provide you with financial product advice and does not take into account your objectives, financial situation or needs. Before making an investment decision you should consider, with a financial advisor, whether this information is appropriate in light of your investment needs, objectives and financial situation. Any opinions expressed in this material are the opinions of the Author only and are subject to change without notice. Such opinions are not a recommendation to hold, purchase or sell a particular financial product and may not include all of the information needed to make an investment decision in relation to such a financial product.
CFSIL is a subsidiary of the Commonwealth Bank of Australia (Bank). First Sentier Investors was acquired by MUFG on 2 August 2019 and is now financially and legally independent from the Bank. The Author, MUFG, the Bank and their respective affiliates do not guarantee the performance of the Fund(s) or the repayment of capital by the Fund(s). Investments in the Fund(s) are not deposits or other liabilities of MUFG, the Bank nor their respective affiliates and investment-type products are subject to investment risk including loss of income and capital invested.
To the extent permitted by law, no liability is accepted by MUFG, the Author, the Bank nor their affiliates for any loss or damage as a result of any reliance on this material. This material contains, or is based upon, information that the Author believes to be accurate and reliable, however neither the Author, MUFG, the Bank nor their respective affiliates offer any warranty that it contains no factual errors. No part of this material may be reproduced or transmitted in any form or by any means without the prior written consent of the Author.
In Australia, ‘Colonial’, ‘CFS’ and ‘Colonial First State’ are trade marks of Colonial Holding Company Limited and ‘Colonial First State Investments’ is a trade mark of the Bank and all of these trade marks are used by First Sentier Investors under licence.