Can You Use the McDonald's ‘Big Mac Index' To Invest — and Should You?
The theory behind the Big Mac Index is that the popular McDonald's sandwich should have the same approximate level of affordability on a local basis from country to country. In other words, if a Big Mac sandwich costs $5 in the United States, it should cost the same amount as $5 in the local currency of whatever country you choose.
To calculate the Big Mac Index, you can take the price of a Big Mac in one country and divide it by the cost in another country. This ratio should be the same as the exchange rate between the two countries. If not, it means that one currency is undervalued relative to the other.
Read Next:
For You:
While obviously a bit tongue-in-cheek in terms of its name and methodology, the Big Mac Index does have value in terms of evaluating the purchasing power of various countries. But is this something that relates to the average investor, and if so, how can you use it? Read on to learn more about this curious index.
Also see five investing tips to combat a confusing economy.
The idea behind the Big Mac Index is the law of one price. Theoretically, all other things being equal, the price of a Big Mac should be the same worldwide, after factoring in currency fluctuations, shipping and transport costs, labor, and so on. However, while the price of a Big Mac is fairly similar on an adjusted basis across all countries, there are variations that will always make it more expensive in some countries than others.
For example, in 2024, Switzerland had the most expensive Big Mac in the world, at an equivalent of $8.07 in U.S. dollars, according to Statista. A Big Mac in the United States cost an average of $5.69. (These figures are after adjustments for currency fluctuations.)
In January 2025, The Economist provided a more direct example, citing a price of 4.59 pounds for a Big Mac in Britain and $5.79 in the United States. This implied an exchange rate of 0.79, whereas the actual exchange rate between the USD and GBP was closer to 0.8. In this example, the price of the Big Mac was essentially where it 'should be' in each country, as the prices were comparable based on the exchange rate. Technically, however, the GBP was slightly undervalued.
Be Aware:
The Big Mac Index affects individual investors who buy or sell foreign currencies or foreign securities, like stocks or bonds. In these cases, investors can use the Big Mac Index to derive whether or not a foreign currency is overvalued or undervalued.
When a foreign currency is undervalued, buying securities with U.S. dollars provides more of a value. The opposite is also true. Buying foreign stocks, bonds or currencies when the exchange rate is working against a U.S. investor, such as when the Big Mac Index says a currency is overvalued, can make investing more difficult and less profitable.
For the average U.S. investor, the Big Mac Index is more of a curiosity than a real investment tool. In fact, it may have more value for an American looking to travel overseas, as it can suggest which countries have undervalued currencies relative to the U.S. dollar. But the Big Mac Index can be a data point if you intend to invest in foreign currencies, stocks or bonds.
More From GOBankingRatesHow Paychecks Would Look in Each State If Trump Dropped Federal Income Tax10 Genius Things Warren Buffett Says To Do With Your Money
This article originally appeared on GOBankingRates.com: Can You Use the McDonald's 'Big Mac Index' To Invest — and Should You?
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
9 minutes ago
- Yahoo
J.P. Morgan: 3 Reasons the US Dollar Is Losing Value — and Why It Might Be Good for Your Wallet
The U.S. dollar has long been recognized as an important currency around the world, but there have been growing concerns this year that it may be losing value. Be Aware: Read Next: According to J.P. Morgan, 'The U.S. dollar is the world's primary reserve currency, and it is also the most widely used currency for trade and other international transactions. However, its hegemony has come into question in recent times due to geopolitical and geostrategic shifts.' Specifically, J.P. Morgan noted a few reasons the U.S. dollar is losing value. It pointed to the following reasons for de-dollarization, which is the significant reduction in the use of the dollar in world trade and money transactions: In the commodities space, energy transactions are more often being priced in non-USD currencies. U.S. banks are not being involved in new payment systems used for cross-border deals. The USD's share of FX reserves, a commonly used barometer of dollar importance, has decreased. I'm a Financial Advisor: Some financial experts who talked to GOBankingRates said there are a few ways the U.S. dollar losing value may be a good thing for the average American's wallet. Annie Cole, EdD, money coach and founder of Money Essentials for Women, said to think about it this way: Imagine the U.S. dollar is tied equally with the European currency — the euro. Suddenly, the U.S. dollar weakens, making European businesses more likely to look to buy American goods over European goods. Cole said this kickstarts a cycle of foreign countries buying American goods, injecting the American economy with outside cash, potentially creating increased demand for American goods and perhaps creating more American jobs. According to Andrew Lokenauth, money expert and owner of BeFluentInFinance, 'Here's what I tell my clients — a weaker dollar typically means stronger stock market returns. My portfolio analysis shows that when the dollar drops 10%, multinational companies in the S&P 500 often see earnings jump 15 to 20% due to overseas revenue conversion.' Finally, Lokenauth added that inflation from a weakening dollar can benefit homeowners with fixed-rate mortgages. According to him, a 5% annual inflation rate essentially gives a homeowner a 5% discount on their mortgage balance in real terms. More From GOBankingRates 3 Luxury SUVs That Will Have Massive Price Drops in Summer 2025 Mark Cuban Tells Americans To Stock Up on Consumables as Trump's Tariffs Hit -- Here's What To Buy 8 Common Mistakes Retirees Make With Their Social Security Checks This article originally appeared on J.P. Morgan: 3 Reasons the US Dollar Is Losing Value — and Why It Might Be Good for Your Wallet Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Newsweek
an hour ago
- Newsweek
Europe's Largest Tunnel to Have Three Lanes of Highways For Cars
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. Construction enabling works for the Lower Thames Crossing, set to become the largest tunnel in Europe, has been scheduled to begin in late 2025. The 2.6-mile tunnel beneath the River Thames, greenlit by National Highways after years of delay, carries an estimated budget of £9-10 billion (approx. $12-$14 billion USD) and aims for road opening in 2032. Newsweek contacted the Bouygues-Murphy joint venture managing the construction of the tunnel for more information on the process via email. Why It Matters The Lower Thames Crossing is the UK's most ambitious road tunneling plan in decades and would dramatically expand connectivity between Kent and Essex. Its planned three-lane highway tunnel, measuring 53 feet in diameter, would be the widest in Europe. The project responds to chronic congestion at the Dartford Crossing, which currently serves as the only road tunnel across the Thames east of London. What to Know The development consent order for the Lower Thames Crossing was granted on March 25, 2025, following years of procedural delays. The preliminary phase of construction includes substantial soil treatment and complex ground preparation at the north portal, where construction of the launch structure for the tunnel boring machine (TBM) is intended to begin in autumn 2026. The TBM launch is planned for spring 2028, targeting project completion and road opening by 2032. A rendering of the Lower Thames Crossing in England, which would be the widest tunnel in Europe if completed. A rendering of the Lower Thames Crossing in England, which would be the widest tunnel in Europe if completed. Bouygues-Murphy The central tunnel's three-lane design is notable for a unique underdeck systems arrangement. The tunnel will traverse multiple difficult subsoil layers: a surface of historical and active landfill materials, including spoil from London tunneling projects and decades-old power station fly ash, a thick layer of alluvium composed of silts, clays, and peat, and, finally, highly variable chalk. Alan Price, technical director of the Bouygues-Murphy joint venture, described the area as "probably the worst geology anyone can find in England, let alone South England." The tunnel boring machine will initially need to pass through approximately 300 meters of these unconsolidated and contaminated deposits before reaching chalk suitable for efficient tunneling. What People Are Saying Alan Price, technical director, Bouygues Murphy JV, at the Ground Engineering Piling and Foundations conference, April 2025: "Now we have a project, and it's just a case of how fast we can hit the accelerator, really. "The ground is so soft in the alluvium and the tunnel rings are so big, it wouldn't actually hold up the ovalisation we got on the rings. It's just not good enough. So, we have a massive campaign of cutter soil mixing before we can start tunnelling. "We would love to have launched our tunnelling machine in the nice dry chalk [on the south side] above the water table, but power supply wasn't actually sufficient in north Kent to drive the tunnelling machine." What Happens Next Pending final consent, enabling works at the Lower Thames Crossing will start in late 2025. Major construction on the TBM launch shaft and other critical infrastructure is slated for autumn 2026, with tunnel boring to commence in spring 2028. The project aims to open the new highway crossing by 2032.
Yahoo
19 hours ago
- Yahoo
Here's How Much a Meal at McDonald's Costs in the US Compared to Asia
While American diners may be a bit miffed at the recent price hikes common to ordering a meal at McDonald's compared to times past, inflation appears to be taking a bite out of fast-food budgets worldwide, Asia included. Read Next: Find Out: According to The Washington Post, McDonald's menu prices ticked upward by about 40%, on average, during the five-year period spanning 2019 through 2024. But what about nations such as Japan, China and South Korea? A brief comparison of some menu item prices, notably the staple Big Mac combo, follows. If you're keen to visit the golden arches in the land of the rising sun, you're going to spend a whole let less than you might if you were to do so stateside. A Big Mac meal in Japan will set you back 750 yen, or about $5.20, while it's priced at $10.19 in the United States. Meanwhile, the price differential is about the same when comparing two close cousins — the Spicy Crispy Chicken meal (770 yen, or $5.34) from Japan set against the Deluxe Spicy McCrispy meal, which comes in at $10.29. If breakfast is more your bag, an Egg McMuffin combo costs $7.69 stateside, versus $2.77 in Japan. If you're visiting or residing in China, it's sometimes more difficult to draw direct comparisons given the difference in regional menus between U.S. restaurants and their Chinese counterparts. Nonethless, the staple Big Mac sandwich will set you back $3.47 in China (as of 2024, per an infographic distributed by The Economist), versus $5.89 in the United States. One reddit user posting in July 2024 claimed that a double cheeseburger, fries, soft drink and corn cup set them back $4 USD — while a combo containing two cheeseburgers, fries and soft drink will cost you more dearly at $9.19 in the U.S. As The Korea Herald reported, McDonald's recently introduced further price increases on 20 menu items in March of this year, less than a year after price increases hit most menu items in that country in May 2024. As a result, the Big Mac meal increased by 200 won to a total of 7,400 won — or $5.47. That's still only a little more than half the price it would cost you in America. While menu prices are scarce otherwise, Shuttle Delivery services indicate a premium of 28% when delivering McDonald's food to hungry customers. A rough extrapolation suggests that a McCrispy meal in South Korea would set one back about 7,000 won (or $5.17 USD, versus $10.19 domestically) or a Quarter-Pounder with Cheese meal about 7,100 won (or $5.25, against $10.19 in the U.S.). More From GOBankingRates Mark Cuban Warns of 'Red Rural Recession' -- 4 States That Could Get Hit Hard 25 Places To Buy a Home If You Want It To Gain Value 8 Common Mistakes Retirees Make With Their Social Security Checks This article originally appeared on Here's How Much a Meal at McDonald's Costs in the US Compared to Asia
