FRANKFURT (DEUTSCHE-BOERSE AG) - Fund manager Christoph Frank analyzes the possible effects of a German EM title win on the German stock market. First of all: one or the other stock market has shot up in the past.

June 25, 2024: Late, but in my opinion deserved, the German national soccer team secured a draw in their final group match against Switzerland last Sunday evening and thus the group win. England, Denmark, Slovenia and Serbia will play each other on Tuesday to see who they will meet in the round of 16 next Saturday. If they were to overcome this hurdle as well, there would be three more games to go before they win the title. The bookmakers currently rank only top favorite France ahead of the German team. If the team maintains its form in the preliminary round and gets its defensive problems under control, the title is a distinct possibility with home advantage behind it.

Would a German title win have an impact on the local stock market? Of course, this question is intended to be playful, in keeping with the subject matter. For one thing, the data basis is far too thin for a serious analysis: there are too few data points, some of the winning countries (some of which no longer even exist) were called the Soviet Union or Czechoslovakia, where there were no stock markets at the time of the title wins. On the other hand, it would be difficult to establish a causal link between a European Championship victory and a subsequent bull market on the stock market. Nevertheless, I have compiled some data for this column (just for fun).

Specifically, I analyzed whether the domestic stock market of a winning country outperformed from the day of the European Championship final (always in June or July) until the end of the year or in the twelve months following the title win. As a benchmark, I used the MSCI World for the global equity market and the Stoxx Europe 50 for the European equity market, which also includes shares from countries outside the eurozone, such as the UK or Switzerland. This is in keeping with the field of European Championship participants, which also includes non-euro countries (or non-euro soccer associations) such as our preliminary round opponents Scotland and Switzerland.

The results were widespread: the DAX, Germany's leading index, soared by over 40 percent from the end of June 1996 to the end of June 1997 after the last German European Championship title win for the time being, although this did not represent an outperformance in the stock market environment at the time. The same applies to the price losses of the French CAC 40 after the French triumph in 2000 and the losses on the Spanish stock market in 2008. At the time, the bursting of the new economy bubble and the financial crisis dominated events on the stock markets. Relatively inconspicuous returns also followed Spain's (renewed) title win in 2012 and Portugal's success in 2016. The winning market's own life was more pronounced at the previous European Championship, which was not held until 2021 due to the coronavirus pandemic: European champions Italy's stock market slumped significantly, particularly in the first half of 2022, which also caused the total return from mid-July 2021 to mid-July 2022 to turn sharply negative, in stark contrast to the MSCI World or the Stoxx Europe 50, which largely held their own.

Greece's stock market, on the other hand, took the cake after its triumph in 2004: Around 36 percent gains in the Greek share index (Greece) Athex Composite contrasted with around 15 percent for the World Share Index and the Europe Index. If you want to squeeze an explanation out of your ribs, you could argue that a causal link is perhaps most likely to emerge in the case of narrow-market equity markets and/or surprise winners. Personally, however, this seems more like playful conjecture than fact-based analysis.

Whether there is a causal connection or not, I wouldn't mind seeing a repeat of 1996. Germany wins the European Championship title and in the following twelve months German shares gain over 40 percent. Neither German soccer fans nor share lovers would have anything against this double (summer) fairytale.

By Christoph Frank, June 25, 2024, © pfp Advisory

Christoph Frank is Managing Partner of pfp Advisory GmbH. Together with his partner Roger Peeters, the expert, who has been active on the German stock market for over 25 years, manages the multi-award-winning stock picking fund DWS Concept Platow (LU1865032954), which was launched in 2006, and pfp Advisory Aktien Mittelstand Premium (WKN A3CM1J), which was launched in August 2021. Further information can be found at www.pfp-advisory.de. Frank writes regularly for Frankfurter Wertpapierborse.

(Deutsche Borse AG is solely responsible for the content of this column. The articles are not an invitation to buy or sell securities or other assets).