You might have seen those charts of US vs global relative price performance (i.e. the black line in the chart below), showing how extreme it has become. But the red line shows that there is a fundamental reason for the direction of travel in the black line.
Yes US stock prices have significantly outperformed vs global stocks, but US earnings have also significantly outperformed vs global (the red line).
There are 2 key takeaways in this chart: first, the black line while correct in direction of travel given fundamentals, has substantially overshot (this is why when you look at just about every measure of valuations, it’s clear that US stocks trade at a major premium vs global stocks).
Second, for global stocks to turn the corner and start outperforming vs US, you need more than just cheap relative value (and it is very cheap), you need the fundamental trend to change — the red line to go down. As discussed above there are a few ways this could happen, but I will say again: the average investor is not prepared for it (or even contemplating it).
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