hello and welcome back to the note and a
happy thanksgiving to our American
viewers now we've had a fairly quiet day
on world markets peps the most
interesting development was another fall
for the Euro against the dollar it's now
almost back to its lows for the year
sets much earlier and that's in line
with another very dramatic long-term
trend which is that european stocks are
utterly underperforming american stocks
if we take a look at this chart you can
see that since january 2008 the footsie
euro first 300 when you judge this in
common currency terms has lost more than
half of its value compared to the sp500
those who remember back that far that
top there was created by the rogue
trading instantly Jerome curvy L
incident at societe generale ever since
then european stocks have inexorably
underperformed US stocks now a lot of
this is the currency so if we take the
currency out of the equation and compare
the euro first in euros with the S&P in
dollars look at everything in local
currency you can see that the effect is
more muted there was a much more
impressive rally for european stocks at
the beginning of this year but you can
still see european stocks have given up
some third of their value against the SP
and the trend still looks very negative
at present how do we explain this some
of this obviously is the eurozone crisis
a lot of this is that the US has had a
much more lenient monetary policy
whatever you think of that it certainly
helped to boy the valuations of stocks
but I think the most important reason is
to do with hope or optimism a good theme
at us thanksgiving american stocks have
a very rich valuation of what appear to
be top of the cycle earnings european
stocks have rather a low valuation of
what appear to be depressed earnings
that is the main driver of this we can
expect that to reverse and so i think
americans should be very thankful for
the strength of their stock market at
the moment the chances are that at some
point before too much longer this
long-term underperformance by
europe of us is going to start to
reverse