Are all of your eggs in one basket?
You may not think so if you’re fully diversified in different companies and different sectors. But what percentage of your stock holdings is of companies within the U.S.?
Without question, the U.S. equities market is the single strongest equity market in the world. Therefore, most of your stock holdings should be within the U.S.
But have you considered the Middle Eastern stock markets? Or Spain? Or Greece?
These are among the top 10% strongest non-U.S. equity markets right now in terms of relative strength, yet it never occurs to most Americans to consider them as options.
I recently studied 52 global market ETFs, comparing each chart to the other 51 charts (so that’s 2,652 charts). My study counts the number of relative strength buy signals, which we see when one chart significantly outperforms another.
Let’s take a look, starting with what’s likely the most obscure: the Middle East. We will focus first on Market Vectors Gulf States Index ETF (NYSE: MES).
In mid-2013, Middle Eastern markets broke out of a four-year base. And as the old adage goes: “The bigger the base, the bigger the breakout.”
In 2013 this index gained 33.47%, and that’s not counting dividends. If you look at the bottom of the chart above, you can see the “relative strength” when compared to the S&P 500. The line moves up when this index is outperforming the S&P 500 and vice versa.
Let’s zoom in for a closer look…
You can see, above, that the index recently gained significant strength against the S&P 500, most notably from November 2013 through February 2014. In the last 12 months, the ETF is up 42.85%.
Next, let’s look at Spain’s equity market via iShares MSCI Spain Capped (NYSE: EWP). Remember Spain, the country that was on the verge of imploding just a few years ago? While the U.S. went through the turmoil of 2008, Spain’s chart seemed to go through the same thing twice!
But it’s now up more than 100% from the 2012 lows, and it’s up 29% in the last 12 months alone.
If you still feel nervous about investing in Spain right now, that’s probably a good sign that the bull market is far from over. Market tops happen when everyone swears the market won’t go lower. Spain is just 20 months past its bear market low.
Everyone feels comfortable about investing in the U.S. stock market today, five years after our bear market low. But as you can see in the chart below, investors didn’t feel comfortable in November 2011, 20 months after that low.
Again, Spain is one of the top 10% of countries to invest in right now.
What about Greece? It’s another market that was supposed to implode, but it’s breaking high. Like the other ETFs, you can see more and more volume pouring into the Global X FTSE Greece 20 ETF (NYSE: GREK) as index traders become more interested in the strongest non-U.S. stock markets.
You don’t have to worry about the fact that these ETFs may have light volume at times. They are backed by the actual stocks that make up the index the ETFs track. The volume may be low, but they are liquid.
These three non-U.S. stock markets are showing increasing relative strength against the S&P 500. For the record, the top spot in the 52-ETF matrix that I created is the Guggenheim S&P 500 Equal Weight (NYSE: RSP), which represents the equally weighted S&P 500.
So the U.S. market is still the strongest. But what happens when it’s not? Will you have all of your eggs in one basket?
View original at: Investment U
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