Looking for Value Across the Pond
US vs. Europe Relative Performance
Source: BofA Merrill Lynch Global Investment Strategy, Global Financial Data, John Mauldin as of June 6, 2019
Merrill Lynch recently wrote a piece in June highlighting the incredible run over the past 10 years that the S & P 500 (+215%) has had versus the Euro Stoxx 50 (+41%).
Since 1950 the difference in performance between the US and Europe had typically remained within 1 standard deviation. Around 2015 this disparity blew out to a 4 standard deviation event, reaching the most extreme level seen in at least 70 years.
This relative underperformance has led many investors to question their allocations to European equities, while others are seeing an opportunity at these valuation levels despite compressed earnings.
With this chart being at such an extreme that we have not witnessed before, within our International Intrinsic Value strategy our process has led us to become overweight Europe with the expectation of a likely reversion to the mean.
This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance. Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2019
The indexes used in the chart are unmanaged, and not available for direct investment; they include reinvestment of dividends; they do not reflect management fees or transaction costs: S&P 500 Index is a widely recognized index of market activity based on the aggregate performance of a selected portfolio of publicly traded common stocks. Euro Stoxx 50 Index, Europe's leading blue-chip index for the Eurozone, provides a blue-chip representation of supersector leaders in the region. The index covers 50 stocks from 11 Eurozone countries: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.