I'd love to buy some exposure in European stocks, but there's a small hitch: We're in the middle of the "blow-off" parabolic move right now.
A blow-off is a bearish signal if ever there was one, which means a rally is just about out of steam – "just about" is the operative term there.
But with a little patience and a look at the charts I'm going to show you, we'll have a fantastic opportunity to jump all over when the time comes.
It's coming soon, as you'll see.
Now, there are two big reasons why I like Europe in the intermediate term…
Here's Why We Need a Piece of Europe Now
The reasons I'm so eager to get exposure here aren't immediately obvious.
European stocks have lagged the U.S. stock performance, bogged down by the overall debt problems among the so-called "PIIGS" of the Eurozone: Portugal, Italy, Ireland, Greece, and Spain.
Then of course came the threat of Grexit and the reality of Brexit.
As you can see in this chart comparing European to U.S. stock returns, the United States has outperformed by almost three-to-one since the bottom of the 2007-2009 Great Recession:
Now, it has to be said, the U.S. economy did make a better recovery and did not fall as deeply into debt problems as the Eurozone, and corporate earnings growth was certainly better…
But not three times better.
When an asset class outperforms another over time, the two usually revert back toward the mean at some point in time. And that's what happening now. Let's look at that same chart on a shorter time frame:
More recently, with U.S. stocks stuck "in the box" since mid-February, money has been rotating into Europe:
This type of asset rotation is not at all unusual and can last for quite a while – especially when there is a fundamental underpinning for rotation.
That leads me to the second big reason why I like European stocks in the intermediate term…
About the Author
Nationally recognized technical trader. Background in engineering, system designs, and risk reduction. 26 years in the markets.