Enis’s Macro Wrap – U.S. Underperformance?

by Enis October 22, 2012 7:25 am • Commentary

To get a sense for the magnitude of U.S. outperformance over the last 3 years, check out this chart that plots the SPX index, Euro Stoxx index, Hang Seng, and Nikkei since Oct 2009:



The U.S. is the light black line that starts in the bottom left, and ends in the bottom right.  The other 3 major indices are all lower vs. their level from 3 years ago.  Meanwhile the U.S. is up 25%.  Talk about outperformance.

So it’s been a major departure from the norm in the past week.  For the second time in a week, I’ve felt very surprised to see the SPX futures indicate an open close to unchanged (+0.1% right now), while the Hang Seng, Nikkei, and Euro Stoxx all traded in the green overnight.  Especially for the Nikkei and Hang Seng, since the majority of Friday’s 1.7% selloff in the SPX occurred with the Asian markets closed (meaning, SPX futures were not down much early Friday morning).

Seems like global fund allocators are finally paring back some of their long U.S. positions and rotating those funds in other countries.

Markets overnight:

  • Asia opened in the red in sympathy with the U.S. from Friday, but the major markets all ended in the green or close to flat.  Weak export data in Japan led to more calls for central bank stimulus.  A bullish China report by Goldman Sachs (due to their expectations of further stimulus) was also cited by some for the strength.
  • Europe also opened in the red and quickly rallied to the green, now up 0.4%.  Decent election results for the ruling PP party in Spain was a mild positive.
  • The dollar opened stronger, and commodities weaker in the Sunday night session, but now the dollar is slightly lower and commodities slightly higher for the most part.  The Japanese yen is the main exception, down 0.65% vs. the dollar, and near 4 month lows.
  • No macroeconomic releases today.  FOMC decision on Wednesday will be closely watched.  Earnings from CAT this morning, and Yahoo and Texas Instruments after the close.