We have been strong advocates of overweighting the United States and companies that generate the majority of their revenues in the US for a couple of years now, so for those following this trade, we wanted to provide an update of how the S&P 500 is performing relative to the rest of the world. The chart below shows the relative strength of the S&P 500 to the MSCI World Ex US Index. In the chart, when the line is rising it indicates that the US is outperforming the rest of the world and vice versa when the line is falling.
As shown in the chart, early this Summer the US hit its highest level relative to the rest of the world since September 2004. Since then, the line has essentially flat-lined, and it is currently just slightly off its highs of the Summer. Given the fact that European markets have rallied so strongly since their late July lows, the fact that the US has kept up pace with Europe is impressive. While Europe cratered in the early part of the summer, the S&P 500 held up substantially better, but as Europe rallied back so too did the US.
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