3 Reasons To Rotate Away From US Equities

March 26, 2015

It has been a long—and many would say—well-earned period of outperformance for US assets. Since the global financial crisis, U.S. equities have soared on the twin tail winds of rising corporate profits and an easy Fed.

 

Bulls and bears may dispute the reasons for this longer-running cycle, but everyone will gape at the numbers. From October 2009 to February 2015, the MSCI USA Index returned 124 percent; almost triple the 43 percent return the MSCI World ex USA Index generated over the same period.

 

 

 

But no upturn lasts forever. How to tell when it has ended?

 

The trouble with financial markets is that long cycles end, and begin, unceremoniously. No welcoming party greets the new trend. No reception is held. And no bunting is hung to mark the inflection point. Rather, the significance of important events that punctuate them is usually only revealed in retrospect.

 

Yet, the trend of U.S. outperformance is showing telling signs of reaching its endpoint or, at least, a temporary remission. For global asset allocators, we offer the actionable takeaway in preview: Rotate equity weights away from the U.S. into the eurozone, or better yet, emerging Asian stocks. State Street’s SPDR Euro Stoxx 50 ETF (FEZ | A-76) and SPDR S&P Emerging Asia Pacific ETF (GMF | C-82) provide targeted access to each respective region.

 

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