So far this year, players have chipped away at the elevated p/e ratio of the US market. With
QE headed into eclipse or worse, This should come as no surprise. In recent years, US
stocks simply killed it against the rest of the world, but change has been occurring slowly
as seen in the relative strength of the MSCI World (Ex. US) vs. the SPX.
The relative strength index for the global market without the US has been trending weaker
but note the extended base in place since the middle of 2012. Note also that the downtrend
could now be reversing to the upside. Finally, check out how the MSCI world index has
tended to lose ground in the spring time, a period when the SPX has been vulnerable on a
seasonal basis. If the US market corrects further over this year's second quarter and the
MSCI World holds up in relative strength, that could be a real telling sign that investors are
inclined to continue to look more favorably at the international scene. Moreover, with better
global growth, mild pressure on the US$, and upturns in oil and other commodities tentatively
underway, interest abroad could pick up again even if the higher beta MSCI World falters
a bit this spring on a weaker SPX.
- Peter Richardson
- Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!