In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
It’s Time To Look Outside The US
The same areas of the market that are starting to drive the rotation from growth to value are also likely to drive rotation between US and ex-US stocks. The reason for this is simple. International stocks tend to have a high relative weighting toward value, while the US has one of the highest allocations to tech and growth of any country. While we’re still seeing very little evidence of a trend reversal in our ratio charts of international vs US stocks, we are starting to see more and more breakouts from international indexes and ETFs on absolute terms. Fresh legs higher from these diversified global indexes and individual country ETFs could be what sparks a turnaround in the relative trends. We want to keep a close eye on value-heavy countries such as Canada, Australia, and various areas of developed Europe. One area that is standing out recently is the Eurozone and the UK in particular. The chart below shows both the iShares MSCI UK ETF (EWU) and the European Financials ETF (EUFN) resolving higher from multi-year bases. Seeing these former laggards break out to new highs is a good representation of what we’re seeing from global equities these days, and it's not bearish. These are two ETFs we can utilize for long exposure right now.
