European equities are staging a bit of a breakout to start off the week, with the STOXX 600, a broad benchmark of European equity market performance, trading up just under 1% and back above its 50-DMA for the first time since late June. Today’s rally in the STOXX 600 is also notable due to the fact that the index is poised to break out above both its 200-DMA and 50-DMA on the same day. Looking at the chart below, the index has also broken its short-term downtrend that’s been in place ever since it last traded above the 50-DMA, and that could open the door for more short term gains. Looking at the chart below, it doesn’t look as though it has been a particularly good year for European equities, as the STOXX 600 is up just 4.9% on the year.
For US investors, however, the picture for European equities looks a lot rosier. The primary reason for this is the weak US Dollar, which has impacted the performance of various assets classes in a big way. We covered this topic in detail in last week’s Bespoke Report newsletter, so if you are not a subscriber, we strongly recommend that you take advantage of our special introductory $1 offer and check it out now! The chart below shows the performance of the STOXX 600 index, but instead of local currency terms, we show how performance would look when translated into dollars. In other words, for a US investor, how has performance looked? In this scenario, the STOXX 600 is not only not in a downtrend, but it is breaking out of a multi-week consolidation phase. Rather than being up just 4.9% YTD, in dollar-adjusted terms, the STOXX 600 is up close to 20%! Like just about everything else in life, when it comes to market returns, perspective is everything.
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