My thesis at the start of the year was that European equities would outperform despite the sovereign debt crisis because of relative value vis-a-vis the United States. It seems that Jeremy Grantham and Marc Faber agree with those sentiments as both have recently recommended carefully adding positions in Europe.
When I last updated you in April on how my 2012 predictions were tracking, this one was not tracking. It is still not tracking as the ISHS MSCI Europe is about flat year to date, down 1.8%. Meanwhile, the S&P500 is up 7.4% for a differential at mid-year of about 9%. I still like European equities over US shares on a valuation basis though and believe Grantham and Faber give good explanations as to why legging into Europe with accumulated cash is a good idea as stocks fall.
As this site is now reader-supported via Patreon, the remainder of this article is only available to subscribers at a specific patronage level. Articles at patronage levels BRONZE, SILVER, and GOLD are denoted by the categories in blue capital letters above the post. Posts categorized DAILY are available to both SILVER and GOLD patrons.
Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.