Investors on Wall Street are bleeding red, white and blue, pouring money into American equities already trading higher than their European counterparts.
The Data: A post on X from Mike Zaccardi relayed data from the Bank of America fund manager survey.
Meanwhile, the valuations of American companies are several standard deviations higher than European equities, according to Bank of America.
Country Data: American companies have yielded hefty gains in recent years. The SPDR S&P 500 ETF Trust SPY, which tracks the 500 largest American companies, added more than 200% to its market value in the past 10 years, an annualized return of nearly 12%.
Meanwhile, European indices — and respective economies — have struggled.
The France-tracking iShares MSCI France ETF EWQ returned 46% in that time period, good for an annualized return of under 4%. The German-tracking iShares MSCI Germany ETF EWG returned 18%, an annualized return of 1.68%. The Italian iShares MSCI Italy ETF EWI has returned around 24%, an annualized return of about 2.12%.
Other countries have fared worse. The Britain-tracking iShares MSCI United Kingdom ETF EWU has shed over 9% since 2014. The Spanish iShares MSCI Spain ETF EWP has lost over 12% of its market value in that time span. Both countries’ annualized returns are close to zero percent.
European Outliers: A few countries have far outperformed the rest of the European continent in recent years.
iShares MSCI Denmark ETF EDEN returned over 138% since 2014, an annualized return of over 9%. The Danish economy has apparently benefitted from its exposure to the pharmaceutical industry.
iShares MSCI Ireland ETF EIRL is up 70% in that period, an annualized return of about 5.43%. Ireland boasts a low corporate tax rate of 12.5% and high levels of foreign investment.
Why it Matters: It is unclear whether the trend of American exceptionalism in equities pricing will continue into the next decade. As their respective economies ease back into moderate economic growth, European countries may benefit from leadership changes.
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