Marc Chandler
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Reader: Any thoughts on why the European stock markets, the German Dax in particular, have held up so well vs. the U.S. market this year? The Dax is barely off its highs. -- R.C. Marc Chandler: I don't have special insight into the Dax per se, but I would point out that most of Europe's bourses are outperforming the U.S. Consider that through June 3, the Dax was up just shy of 6%, but the French CAC was up about 8.5% and Italy's major index was up 4.6%, while Switzerland's was up 9.08%. Even the U.K.'s FTSE outperformed the U.S.'s major averages, gaining 3.8%. The fact that low interest rate countries, like Switzerland, as well as high interest rate countries, like the U.K., have better-performing equity markets than the U.S. means that interest rates probably are not the likely explanation for the outperformance. However, before you jump into the European markets, note that for U.S. dollar-based investors, the better performance is completely wiped out when you take into account the euro's weakness vs. the dollar's strength. For dollar-based investors, for example, an unhedged position in the Dax actually has lost 4.5%.
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