European Stocks Now Outperforming U.S. Equities
Marc Chandler | Mar 03, 2015 11:25PM ET
This Great Graphic shows two time series. The white line is the S&P 500 and the yellow line is the Dow Jones STOXX 600 which tracks European stocks. Using Bloomberg analytics, we indexed the two time series from the start of 2014. In the 14 months covered here, the S&P has risen by a little more 15.0% and the Stoxx 600 has risen by 19%.
Over this time period, the euro has fallen about 18.2%. This would nearly completely wipe out the Stoxx 600 gain unless the currency was hedged.
As the chart shows, from late June through the end of last year, the S&P 500 outperformed the Stoxx 600. During this window the euro fell almost 11%. However, since the start of this year, the Stoxx 600 has easily outperformed. Since the start of the year, the S&P 500 has risen about 2.4%, while the Stoxx 600 has risen by 13.5%.The euro is off about 7.6% year-to-date.
What is the explanation for shift? When the euro began to slide, US stocks outperformed. Later as the euro slide continued, European stocks have outperformed. It is difficult to explain this by discussing the dollar's impact on US corporate earnings , though many try.
Other variables that may have contributed include the anticipation of the ECB launching a more aggressive asset purchase plan and related to this is the negative yields. A third of the eurozone members have negative 2-year yields. Three members have negative interest rates on 5-year benchmarks. Four eurozone countries have 10-year yields below 50 bp. Another consideration is that so far this year, European economic surprises are mostly to the upside, while the US data has mostly disappointed.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.