Here’s a quick question. Take a look at the chart below. From a purely technical perspective, what do you think? It doesn’t look very good, does it? After reaching a peak in May, whatever this chart is has done nothing but drift lower, putting in a series of lower highs and lower lows, and it has now erased all of its gains from its April break out.
Now, look at the next chart. This one looks a lot healthier, doesn’t it? This chart just recently hit a new high after a two-month consolidation period and remains right near its highs. Looking at both charts, most technicians would say the chart below is the more attractive of the two.
So, what are the two securities shown in the charts above? Believe it or not, they are actually both charts of the STOXX 600, which is an index comprised of large, mid and small cap stocks spread across 17 countries of the European region. The only difference is that the top one shows the STOXX 600 denominated in euros, while the second chart shows the STOXX 600 denominated in US dollars. Because of the decline in the dollar this year, the difference in performance between the two indices is close to 12 percentage points (STOXX 600 YTD return in local currency = 4.7%, STOXX 600 YTD return in USD = 16.5%). It just goes to show that when looking at returns, perspective (especially in currency terms) is everything. So far this year, US investors who are long Europe are feeling a lot more flush than their European counterparts.