US equities are officially the laggards of the world.
The S&P 500 is underperforming just about every stock market around the globe this year.
After four months of steady underperformance, a growing list of international indexes are making new 52-week highs relative to the US.
While these ratios might be stretched over the short-term, when you zoom out, they are taking the shape of primary trend reversals.
All this tells us is to expect more leadership from international stocks in the future. I think we should get used to a global market of stocks that is no longer dominated by the United States.
And this is great news. Participation broadening around the world simply means more investment opportunities for us.
So I’m all about international these days. The first watchlist and chartbook I’m looking at most mornings is our international ETF universe.
Here’s a table of that universe sorted by 1-month relative performance:
Yesterday, I wrote about China. We’ve been all over that trend since last year. We’ve also pounded the table on Europe for some time now. And more recently, we turned bullish on Brazil.
There are lots of places we can go to generate alpha, and we’ve been doing just that.
But rather than highlight a new region or country that we like, I want to talk about the general risk-on information we’re getting from our international scans right now.
Go back to the table and read through the top-performing international ETFs over the past month.
Mexico.
Brazilian small caps.
Poland.
Indian financials.
Philippines.
Do you get it?
These are all emerging market equity funds. In other words, they come with a higher degree of risk than their developed market peers. And that’s just the information I’m talking about.
Global risk appetite is improving in a meaningful way right before our eyes.
While US stocks are struggling, investors are looking for opportunities abroad and embracing some of the most risk-on assets out there.
It’s not defensive. It’s not bear market behavior. It’s just the opposite. And the more these areas continue to trend well, the more the odds increase that the S&P 500 will follow international stock markets back to new highs.
I’ll be writing a lot more about international equities, and specifically how I’m positioning my portfolio for this new regime of ex-US leadership in the future.
Make sure you caught yesterday's note on Alibaba. It’s one of my largest holdings right now. And it’s perfectly actionable.
Steve
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