Global stocks may start to outperform the U.S.

by Michael Tarsala


That’s been the chant from a lot of money managers and stock strategists in recent months.

And for good reason. The U.S. has been a relative safe haven. The dollar is rising. U.S. Treasuries are in great demand. And sliding U.S. stocks have outperformed their international peers.

Yet take a look at this chart:


It’s the S&P 500 (SPX) relative to the iShares MSCI EAFE Index Fund ETF (EFA), made up of large-cap global stocks.

You’ll see just how much the S&P has been outperforming the EFA since last summer.

You might also notice, however, that the really appears long in the tooth. The RSI indicator at the top of the chart is at an extreme level.

Breakdowns back below those extreme RSI levels in the past — especially in early 2010 — have come ahead of multi-month periods of outperformance of global large caps, vs. the S&P.

So contrary to popular opinion, there is reason to think that global stocks might soon start to outperform the U.S.

That might make the case for a basket of underpriced large-cap global stocks. Leif Eriksen runs the Global Growth Brands model at Covestor. He generally has no more than 10 stocks in his portfolio. Whether or not they are U.S. companies, they are ones he thinks have strong global growth opportunities.

It’s not a suitable investment for everyone. But talk to us if you want to learn more about his strategy, or other models that might fit your investment goals.