Can the England men’s team join the Lionesses in propelling us to victory in this Sunday’s European Championship final?
Fans up and down the country certainly hope football is finally coming home this weekend. But what does it mean for homegrown stocks? Those with exposure to the UK stock market may be praying for a Euros win too.
There has been a fair amount of talk about Swiftonomics in recent months, as Taylor Swift’s Eras Tour has sparkled its way across Europe, boosting the economy in several countries as fans spend money on travel, hotels and food.
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This has left some investors asking whether the UK could experience a similar effect this weekend, as football fans pour into pubs and bars to watch the game before celebrating or commiserating in style.
We take a closer look at the sectors that are hoping to benefit. Plus, will this seasonal lift in sales translate into any kind of meaningful opportunity for investors, or is it just short-term noise?
The sectors hoping to benefit from football fever
Pubs and bars will be the most obvious beneficiaries of an England football final. “We expect an incredible 10 million extra pints to be poured in our pubs this Sunday,” says Emma McClarkin, chief executive of the British Beer and Pub Association.
This will generate an additional £48 million in trade for pubs and breweries across the nation, she adds, with pubs being licensed to stay open until 1am on Sunday night.
But it’s not just the hospitality sector that will be hoping for a boost in sales this summer. Sporting brands will have been stocking up on football kits, while supermarkets will have been encouraging shoppers to indulge in a pre-match barbeque.
“Trollies are set to be piled high not just with crates of beer but also plenty of snacks to keep fans fed and watered while all eyes are on screen,” says Susannah Streeter, head of money and markets at Hargreaves Lansdown.
“A win may mean sports fans stay fixed to the screen for the Olympics too, hoping for another strong showing from home-grown athletes,” she adds.
Even electrical goods companies will have been hoping to shift more flat screen TVs in the lead-up to the match. After all, goals like those scored by Jude Bellingham and Ollie Watkins deserve to be watched in HD.
However, sadly it’s not just the prospect of a Spanish win that is threatening to put a dampener on proceedings. “With high interest rates and elevated household bills still exerting pain on many consumers, the Euros are unlikely to be an open goal for retailers,” explains Streeter.
Many are still being cautious with their money, as they battle with higher mortgage repayments and depleted savings.
Investing is a long game
Football fever is infectious, and it’s tempting to get caught up in it. However, it’s worth remembering that while sentiment can cause short-term market volatility, it is not a long-term driver of valuations.
Russ Mould, investment director at AJ Bell, points to the words of fund management legend and Vanguard founder, John Bogle. He once called the stock market a “giant distraction from the business of investing”.
What’s more, it’s important to remember that any boost in sales this weekend is unlikely to alter a company's long-term prospects. Most football games are over in 90 minutes (unless you’re England), but investing is a long game.
“No doubt brewers, bar owners and pub landlords will be hoping for [...] a welcome increase in trade should England finally end fifty-eight years of hurt,” says Mould. “However, from an investment point of view, it is a bit of stretch to argue that their sales, profits, cashflows and share prices will get a sustained boost.”
He adds: “Traders may try to whip up a story, but investing is about the long-term competitive position of a business, its management acumen, balance sheet strength and operational and financial performance over a lengthy period of time, with valuation then the ultimate arbiter of investment return.”
What are the long-term prospects for UK equities?
We’ve established that the outcome of Sunday’s final is unlikely to move markets in any meaningful way. But what are the long-term prospects for UK equities? Plus, is there anything that UK equity investors can learn from football fans?
Everyone knows that being an England fan can be painful. There’s so much promise on the pitch but, all too often, it ends in disappointment.
You could argue that investing in the UK stock market has been a comparable experience in recent years. But for UK equity investors, it’s more like eight years of hurt than 58.
Ever since Brexit, UK equity markets have been significantly undervalued compared to their US and global counterparts. And, for the most part, performance has been pretty limp, despite the fact that there are some great players on the pitch. Take the likes of Unilever, AstraZeneca and BP – all UK-listed companies that are famous internationally.
Despite being home to several stock market heavyweights, the UK market has struggled to secure inflows thanks to negative sentiment, weak economic growth and a lack of exposure to tech companies.
The silver lining is that lowly valuations mean investors can buy decent companies for less than they are worth. However, a bit like with the football, it’s a story we’ve heard before.
Telling someone to bag a bargain in the perpetually-undervalued UK equity market is the investor’s equivalent to shouting, “It’s coming home!”
Nevertheless, there are tentative signs that things could be picking up for the UK. The FTSE 100 has had a decent year so far, soaring to record highs. What’s more, the UK suddenly looks like one of the most politically stable places in Europe.
Inflation is abating and interest rates are about to come down. On top of this, the new Labour government has declared that economic growth is its “national mission”. Could this be the catalyst the UK stock market needs for valuations to slowly start catching up?
Maybe, just maybe, it’s finally time for football fans and UK equity investors to have their patience rewarded. It’s certainly been a long time coming.
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