A Bigger World: Lessons from the Largest Football World Cup in History

Jeremy Cunningham, Fixed Income Investment Director, Capital Group

The 2026 football World Cup is the largest in history. For the first time, 48 national teams have competed, up from the previous 32, and it is co-hosted by three countries: the United States, Canada, and Mexico.

This expanded format creates more qualifying spots, especially for regions that have historically been underrepresented, and introduces additional pathways to reach the tournament.

International capital markets have followed a similar trajectory. The MSCI Emerging Markets index now includes 24 countries, up from the 10 that made it up at launch, and its share of global market capitalization has doubled since 2000. The fixed income market has also expanded. Local-currency emerging market debt markets have grown significantly over the past decade, and dollar-denominated sovereign debt issuance in emerging markets has also risen notably, with new issuers joining the traditional ones.

Greater access does not equal equitable access – neither in football nor in markets

In the football World Cup, the path to qualification varies enormously by confederation. Lower-ranked national teams must start in preliminary rounds and play many more matches just to reach the stage where the more established teams begin.

The parallel holds in the markets. Many emerging economies that issue dollar-denominated debt do so at a notably higher cost than developed markets, with lower liquidity and greater dependence on foreign investment flows. Local-currency debt markets have gained depth, but still face operational and transparency constraints that limit participation.

This asymmetry goes beyond pricing. Many emerging economies today have stronger fundamentals than developed markets: faster growth, lower debt-to-GDP ratios, and a younger working-age population. And yet they still face a structural penalty in how they are treated by international markets. Emerging market equities continue to trade at a significant discount to the US market on a forward earnings basis – one of the widest valuation gaps in the past twenty years – while emerging market corporate credit quality has been improving steadily.

The picture is different when it comes to policy flexibility. During the pandemic, developed market governments cut interest rates to near zero, launched large-scale asset purchase programs, and applied substantial fiscal stimulus measures. Many emerging economies faced a crisis of similar magnitude but could not respond to the same degree. Currency fragility, inflation risk, and reliance on external financing meant that rate cuts were more modest, fiscal stimulus more limited, and the recovery slower and more uneven.

The good news is that many emerging economies have spent the past decade strengthening their foundations. Central bank credibility has improved, exchange rate flexibility has increased, and local-currency debt markets have gained depth. All of these factors have helped ensure that the impact of the US Federal Reserve's recent monetary tightening cycle has been far smaller than it used to be in the past.

Even so, the playing field remains uneven, and the cost of a policy mistake remains higher in an emerging economy than in a developed one.

The old labels no longer make as much sense

Argentina, Brazil, and Mexico may be emerging market economies, but in football terms they are hardly "emerging" at all. Conversely, some of the world's wealthiest nations have rarely had real chances of winning a football World Cup. Italy is a telling example: four-time world champion, second in the all-time rankings, and yet Italy is missing this year's World Cup for the third consecutive time – something that has never happened to any other champion nation. Its elimination came on penalties against Bosnia and Herzegovina, a country appearing in only its second World Cup and with barely any presence in international capital markets.

The same holds true in economics. India's economy is expected to grow this year at a pace several times faster than Germany's or the UK's. Emerging and developing economies now account for nearly half of global GDP, up from around 25% at the start of the century, and have driven most of the world economy's growth over the past twenty years. The "emerging" label says very little about an economy's underlying strength, or about the quality of the investment opportunity.

What sets the best teams apart? And the best investments?

In football, sustained success rests on infrastructure: player development systems, competitive domestic leagues, and a deep pool of coaches that allows the system to function beyond individual stars.

In investing, the differentiating factors have a similar structure. At the sovereign level, what matters most is credible institutions, sound policy frameworks, sustainable debt levels, and growth models suited to the current environment. Economies that have invested in institutional quality, human capital, and fiscal discipline are in a very different position, fundamentally, from those that have not.

Countries that have deepened their domestic capital markets – building investor bases through pension funds, insurers, and sovereign wealth funds – have reduced their dependence on external flows and are better positioned to withstand a volatile global economic environment.

The same logic applies to companies. A well-managed company in an emerging market, with a clear competitive position, disciplined capital allocation, and exposure to structural growth, can offer a more attractive risk-return profile than a better-known company in a slower-growing developed market.

Corporate governance practices have improved markedly in emerging markets over the past decade, and emerging market corporate credit quality has been rising steadily since the pandemic. Conversely, a dominant company suffering an erosion of its competitive advantages – whether due to a volatile environment, regulatory change, or poor capital allocation – can continue to look solid on key indicators long after its fundamentals have begun to shift.

Discipline is not only about identifying a company's past strength, but also about asking whether the conditions that supported that strength still hold.

Takeaways for investors

1. Past success does not predict future results. As noted, Italy has won the football World Cup four times, yet has now missed three consecutive tournaments. Its decline was not sudden – it reflects years of underinvestment in infrastructure, player development, and institutional renewal, masked by a reputation that took longer to fade than the foundations underpinning it. Economies and companies follow similar patterns. A sovereign issuer's strong credit rating can coexist with gradual fiscal deterioration for years before markets reflect it. A company with a dominant market position can see its competitive advantages erode long before that erosion shows up in earnings. Markets have repeatedly punished investors who mistook a historical position of dominance for a guarantee of future success.
2. A bigger playing field punishes overconfidence. With more teams and more qualifying pathways, competition comes from more directions. The global investment universe has expanded: there are more economies, more issuers, more markets to access. But greater participation has not translated into more uniform outcomes. Dispersion of results across economies remains wide, and the gap between the strongest and weakest companies within the same sector or region has also widened. In this context, broad exposure to the overall market can carry a hidden cost. In equities, index-based investing increasingly means holding exposure to companies and markets where earnings growth is losing momentum, alongside a smaller group that is better positioned. In fixed income, investing across the entire universe means financing corporate and sovereign issuers with very different credit trajectories.
3. Diversification means understanding how economies and companies work, not where they are located. A portfolio can invest across several regions and still be exposed to the same underlying risks: sensitivity to dollar funding conditions, exposure to a single commodity's price cycle, or dependence on global demand for manufactured goods. The same is true of companies: two banks based in different countries may have seemingly similar balance sheets, yet face completely different regulatory, currency, and credit environments. The more useful lens is to analyze the economic and business profile: what drives growth, how policy is managed, what the external vulnerabilities are, and how an economy or company is connected to global capital flows. An industrial-based Southeast Asian economy may have more in common with Mexico than with a neighboring commodity-exporting country. A well-managed company in a frontier market can offer more attractive risk-adjusted income generation than a lower-performing company in a slower-growing developed economy. Diversification based on these factors is stronger than diversification based on geography alone.