At the end of the 2nd quarter, I started to talk about our European equity overweight in public. I was almost embarrassed at the time but then, because I’m a true coward, as the trade started to go our way I began to gain the confidence to speak more loudly. At least I can admit it :)
In June, a TV producer asked me if I was joking when I said I was bullish on European stocks, by August, the bandwagon began to get noticeably more highly populated. People went from asking “why bother with anything other than US stocks?” to “ohhhhhh, I get it now.”
This is how it works, by the way. See: Green Shoots in Europe (can’t believe I’m saying this out loud)
Charts Etc looked at the outperformance of European stocks here in the 3rd quarter this morning, emphasis mine:
The S&P 500 is up a healthy 3% in the quarter, but the Euro STOXX 50 has almost quadrupled that gain, soaring by +11% and change. It’s also interesting (and perhaps telling) to see the ETFs of two of the most decimated Eurozone countries, Italy and Spain, up 15% and 15.6% respectively, as compared to the equities of a much stronger Germany rising by “just” 8.7%. I say “perhaps telling” because very often before a recession ends, lower-quality tends to lead higher-quality and in this case, with the more fragile and precarious countries like Italy and Spain outperforming stalwart Germany, it could mean economic recovery in the region is for real and not just a temporal blip.