Tread Carefully With The World Cup Host ETF Trade

Since 2010 was a World Cup year (the tournament was hosted by South Africa) and football (soccer) fans have also been treated to the recent announcement of what nations will host the 2018 and 2022 World Cups, much has been made of the impact these events and announcements have on country-specific ETFs. Looking at the Market Vectors Russia ETF

, it's easy to see that the fund is up over 7% in the past week, perhaps helped by news that Russia will host the tournament in 2018. A skeptic would say what about the pop in oil prices? Remember, RSX isn't a play on any sport, but it is nearly 50% allocated to energy stocks. Go back a few years to Oct. 30, 2007, the day FIFA announced Brazil will host the 2014 World Cup. From Nov. 1-26, 2007, the iShares MSCI Brazil Index Fund

proceeded to LOSE 13%. What about South Africa, which is about six months removed from hosting the World Cup? Well, it has been documented that equity markets in the host country perform better in the first half of the year that country is hosting the tournament as markets start to price in an expected bump in GDP. In the second half, the stocks in that country usually don't deliver the same returns that were seen in the first half. Yet who would complain about the 35% run the iShares MSCI South Africa Index Fund

has delivered in the past six months? No one would, but is it fair to credit that run to some post World Cup cheer? Maybe, but emerging markets ETFs have been on fire, regardless of soccer, and gold prices have surely helped boost EZA, too. Moral of the story: The World Cup trade is probably as much market myth as it is credible trading thesis. Trading a country-specific ETF on an event that is multiple years away is tricky, to be kind.