Foreign equities poised to outperform US
The guest argued that extreme valuations and speculative excesses in the US stock market point to a multi-year period of outperformance for foreign equities.
The argument
The guest highlighted that the US market is at its most overvalued level since 1929, driven by speculative vehicles like one-day options and leveraged single-stock ETFs. Historically, cycles of foreign market outperformance last for multiple years, and recent data suggests a new cycle has begun.
The thesis, stress-tested
✓ What validates it
- ✓Continued quarterly outperformance of the MSCI World ex-US index over the S&P 500
- ✓A reversal or cooling of speculative retail options volume in the US
▸ Risks discussed
- ▸A severe US market correction could drag down international markets simultaneously
- ▸Stronger than expected US economic growth could prolong US equity dominance
Hear it yourself
"Now you and I both know that things can remain overvalued, for a long time. You know that old saying for short sellers, the market can remain overvalued longer than I can remain. Solvent. Solvent. Thank you. Yeah. So so I I like to tell people when you're a value investor doing fundamental investment, fundamental analysis, That doesn't tell you much about timing. To me, what it tells you most importantly is what is the risk and what is the potential in the market. But it's told you little about timing. And, you know, to back up one one step further, I I I sort of like to remind people that the to me sorry."
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