Are we beginning to see an end to the long period of US equity outperformance?
The US market has trounced its developed market counterparts in recent years, tripling since March 2009 and effortlessly hitting all-time high after all-time high over the past 18 months.
In contrast, European market rallies in September and December petered out below last June’s high.
2015 has been different, the Euro Stoxx 600 hitting its highest point since 2007 and the German Dax registering fresh all-time highs.
US equities have struggled, with just 33 per cent of stocks recently trading above their 50-day moving average.
In the wider S&P 1500, stocks were down an average of 16 per cent from their 52-week high, according to the Bespoke Investment Group.
Multiple factors are at play.
The rising dollar is impacting earnings estimates, given international sales make up more than 40 per cent of S&P 500 turnover.
The ECB has committed to a €60 billion monthly bond-buying programme, while the US awaits rate rises.
Crucially, the US trades at a premium of 60 per cent to other developed markets, according to Blackrock, making it one of the most expensive markets in the world.
This doesn’t mean US equities must decline.
However, a US-centric approach looks increasingly risky, and diversified portfolios may finally be about to shine. O'Brien's crystal ball Denis O'Brien is an able businessman. His expertise regarding global economics and geopolitics is another matter.
O'Brien was at the World Economic Forum in Davos last week, where he predicted oil would be at $60 by the end of 2015, and that the Federal Reserve would not raise interest rates until the end of the year or early 2016 "at the earliest". The US and Europe, he added, "have the wrong approach on Russia".
Might he be right? Perhaps, but he may also be wrong, as he was in December 2007, when he condemned the "whippersnappers" who predicted an Irish recession, adding: "I thank God Brian Cowen is Minister for Finance."
Regular readers will know we’re sceptical of the forecasting game – studies in countless fields show expert predictions do no better than chance. O’Brien, however, is not even an expert in these fields.
A successful businessman certainly, but not an oil strategist or a money manager or a professor of international politics.
No frugality at Davos Denis O'Brien was just one of many billionaires to be found at Davos, of course – it's not a place you associate with frugality.
“In line for Mindfulness session at Davos, woman next to me is shopping for $60,000,000 - $90,000,000 NYC apartments on her iPhone 6+”, tweeted New York Times journalist David Gelles.
"Love my room at Hotel Europe overlooking the snowy peaks", tweeted veteran magazine editor Tina Brown. "Raucous fondue dinner with the team prepping our Women of Impact Dinner tomorrow".
Best of all, however, must be billionaire investor Jeff Greene, who told Bloomberg that "America's lifestyle expectations are far too high and need to be adjusted so we have less things and a smaller, better existence".
The interview goes on to casually mention that that Greene “flew his wife, children and two nannies on a private jet plane to Davos for the week”.
There are no words. Trade of the century? Marc 'Dr Doom' Faber is at it again, saying last week that betting against central banks represented the "trade of the century", with gold likely to "easily" rise 30 per cent.
We’ve been here before. Last April, he said stocks would suffer falls that would dwarf the 1987 market crash.
In 2013 he made the same call for a 1987-style crash, adding that gold would hit all-time highs.
In 2012 he said there was a 100 per cent chance of a global recession, with stocks facing into a bear market.
US stocks have risen almost 75 per cent since 2012; gold, despite rising recently, remains 35 per cent off its 2011 highs.
In other words, if Faber is finally right, it will help erase some of the losses entailed by his strategy in recent years – hardly the trade of the century.
Fund manager loses the lot Less than a year ago, hedge fund Canarsie Capital managed some $100 million for investors. Little wonder, then, that fund founder Owen Li is feeling "truly sorry" after managing to lose all but $200,000 of that sum.
According to a client letter obtained by CNBC, Li admitted to acting “over-zealously” in recent weeks, making “aggressive transactions” in order to make up for a poor December.
“My only hope is that you understand that I acted in an attempt – however misguided – to generate higher returns for the fund and its investors”, said Li. Hope away, but don’t bet on it.
