In football, sustained success comes down to infrastructure: youth development systems, competitive domestic leagues and coaching depth that allows the system to function beyond individual stars. In investing, the differentiators are structurally similar.
Key takeaways
- A 48-team football World Cup gives more nations a seat at the table — but not on equal terms. The same is true in markets.
- Emerging markets as a category tells you less than it used to. Meanwhile, Italy — four-time World Cup winners — have now missed three consecutive tournaments. In football and in markets, reputation can outlast reality by years.
- More qualifying pathways mean more competition, not more winners. That is true for nations on the pitch and for issuers in portfolios. Broad exposure to a bigger field is not the same as better diversification.
The 2026 football World Cup will be the largest in history. For the first time, 48 nations will compete, up from 32, and it will be co‑hosted across three countries: the United States, Canada and Mexico.
This expanded format creates more qualifying places, particularly for regions that have historically been under‑represented and introduces additional routes into the tournament.
Global capital markets have followed a similar path. The MSCI Emerging Markets equity index now covers 24 countries, up from 10 at launch, and its share of global market capitalisation has more than doubled since 2000. The bond market has expanded too. Local-currency emerging market (EM) debt markets have grown significantly over the past decade and EM government borrowing in dollars has risen sharply, with new issuers joining the field alongside familiar names.
Wider access does not mean equal access – in football or in markets
In the World Cup, the path to qualification varies enormously by confederation. Lower-ranked nations must enter in preliminary rounds, playing many more matches just to reach the stage where more established teams begin.
In markets, the parallel holds. Many EM economies that borrow in dollars do so at significantly higher costs than their developed market peers, with less liquidity and greater dependence on foreign investor flows. Local-currency markets have deepened but still face operational and transparency challenges that limit participation.
This asymmetry runs deeper than pricing. Many EM economies now have stronger fundamentals than developed markets — faster growth, lower debt-toGDP ratios and younger workforces. Yet they continue to face a structural penalty in how global markets treat them. EM equities continue to trade at a significant discount to the US on forward earnings, one of the widest valuation gaps in two decades, while EM corporate credit quality has been steadily rising.
Policy flexibility tells a similar story. During the pandemic, developed market governments were able to cut interest rates to near zero, launch large-scale asset purchase programmes and deploy enormous fiscal stimulus. Many EM economies faced the same shock but could not respond on the same scale. Currency fragility, inflation risk and dependence on external financing meant rate cuts were smaller, fiscal support more constrained and recovery slower and more uneven.
The good news is that many EM economies have used the past decade to strengthen their foundations. Central bank credibility has improved, exchange rate flexibility has increased, and local-currency bond markets have deepened – all of which helped absorb the most recent Federal Reserve tightening cycle with far less disruption than in the past.
But the playing field remains uneven, and the cost of a policy misstep is still higher for an EM economy than a developed one.
Old labels tell you less than they used to
Argentina, Brazil and Mexico may be emerging market economies, but in football terms, they are anything but emerging. Meanwhile, some of the world’s richest nations have rarely threatened at a World Cup. Italy is an instructive case – four-time World Cup winners, joint second in the all-time rankings, yet this is the third consecutive World Cup they have missed, unprecedented for a former champion. Their elimination came on penalties against Bosnia and Herzegovina, a country making only its second World Cup appearance and barely visible in global capital markets.
The same is true in economics. India’s economy is projected to grow several times faster than Germany or the UK this year. Emerging and developing economies now account for close to half of global GDP, up from a quarter at the turn of the century, and have contributed the majority of global growth over the past two decades. The label ‘emerging’ says very little about the underlying strength of the economy – or the quality of the investment opportunity.
What separates the stronger teams — and stronger investments?
In football, sustained success comes down to infrastructure: youth development systems, competitive domestic leagues and coaching depth that allows the system to function beyond individual stars.
In investing, the differentiators are structurally similar. At the sovereign level, what matters is credible institutions, sound policy frameworks, manageable debt levels and growth models suited to the current environment. The economies that have invested in institutional quality, human capital and fiscal discipline are in a fundamentally different position to those that have not.
Those that have deepened their domestic capital markets – building local investor bases through pension funds, insurance companies and sovereign wealth vehicles – have reduced their dependence on external flows and are better positioned to weather global shocks.
At company level, the same logic applies. A well-governed company in an emerging market – with a clear competitive position, disciplined capital allocation and exposure to structural growth – can offer a more compelling risk-return profile than a household name in a slower-growth developed economy.
Corporate governance standards across emerging markets have improved meaningfully over the past decade, and EM corporate bond credit quality has been steadily rising since the pandemic. Conversely, a dominant company whose competitive advantages are eroding – through disruption, regulation or misallocation of capital – may look strong on headline metrics long after the foundations have shifted.
The discipline is not just to identify what has been strong, but to ask whether the conditions that made it strong still hold.
Investment takeaways
1. Past strength is not a forward-looking indicator
As outlined, Italy are four-time World Cup winners but have now missed three consecutive tournaments. Their decline was not sudden — it reflected years of underinvestment in infrastructure, youth development and institutional renewal, masked by a reputation that took longer to fade than the foundations beneath it.
Economies and companies follow similar patterns. A strong sovereign credit rating can coexist with slow-moving fiscal deterioration for years before markets reprice it. A company with a dominant market position can see its competitive advantages erode long before it shows up in headline earnings. Markets have repeatedly punished investors who mistook historical dominance for inevitability.
2. A wider field raises the cost of complacency
With more teams and more qualifying pathways, competition arrives from more directions. The global investable universe has expanded — more economies, more issuers, more markets to access. But wider participation has not produced more uniform outcomes. The range of outcomes across economies remains wide, and at company level, the gap between winners and laggards within the same sector or region has grown too.
In that environment, broad exposure carries a hidden cost. In equities, index level allocations increasingly mean holding large positions in companies and markets whose earnings growth is under pressure, alongside a smaller set that is genuinely well-positioned. In fixed income, owning the whole field means lending to sovereigns and corporates whose credit paths can be very different.
3. Diversification means understanding how economies and companies are wired, not where they sit on a map
A portfolio can span multiple regions and still be concentrated in the same underlying risks — sensitivity to dollar funding conditions, exposure to a single commodity cycle, or dependence on global manufacturing demand. The same applies at the company level: two banks in different countries may look similar on a balance sheet but face entirely different regulatory, currency and credit environments.
The more useful lens is economic and business profile: what drives growth, how policy is managed, where external vulnerabilities lie, and how an economy or company is connected to global capital.
A manufacturing-led economy in Southeast Asia may have more in common with Mexico than with a commodity exporter next door. A well-run company in a frontier market may offer better risk-adjusted income than a lower-yielding name in a slower-growth developed economy. Diversification built on these foundations is more durable than diversification built on a map.
By Jeremy Cunningham is an investment director
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