By Justin Brill

Saturday, May 13, 2017

U.S. stocks have dramatically outperformed the rest of the world since the financial crisis...

The benchmark S&P 500 Index has soared 254% from its March 2009 bottom. Meanwhile, European and emerging market stocks have returned 150% and 106%, respectively, in that span.

But suddenly, investors are no longer favoring the U.S... Money is now moving out of American stocks – and into European and emerging market stocks – at the fastest rate in years. As the Wall Street Journal reported this week...

Global money managers' allocations to U.S. stocks slumped to a nine-year low in April, according to a survey from Bank of America Merrill Lynch. And U.S. equity funds saw an outflow of $22.2 billion during the seven weeks that ended May 3, the largest seven-week redemption in more than a year, according to EPFR Global.

Much of the money is going to Europe. Net inflows into European funds in the first three months of the year hit a five-year high for the first quarter, according to Thomson Reuters Lipper.

Emerging markets are also benefiting. Strong manufacturing, industrial production and trade data in the developing world helped attract the strongest three-month stretch of net inflows to emerging market funds since 2014, according to the Institute for International Finance.

What's behind this change? The Journal cited two big reasons...

First, U.S. stocks have become expensive, on both an absolute and relative basis...

The cyclically adjusted price-to-earnings ratio, known as CAPE, is 22 times in the U.S., compared with 16.7 in Europe and 13.7 in emerging markets, according to Makena Capital Management.

Second, the European economy is finally showing signs of a recovery after nearly a decade of stagnation...

The 19 countries in the European Monetary Union grew by 0.5% in the first quarter, which equated to an annualized growth rate of 1.8%. By comparison, U.S. output grew at an annual rate of 0.7% in the first quarter.

Over the past five years, the U.S. economy outgrew the euro area by 1.4 percentage points a year on average, according to the International Monetary Fund. The IMF expects that gap to narrow to 0.6 percentage point in the next three years...

While European corporate margins are still hovering around recession lows at 5%, margins in the U.S. are already near records at 8.8%, according to [Michel Del Buono, chief strategist at Makena Capital Management.] That suggests "much less potential" for earnings to further grow in the U.S.

This is one of the big reasons Steve Sjuggerud turned bullish on Europe in January...

Steve noted that U.S. and European stocks have performed similarly over the long term... yet each has outperformed the other for short periods of time. Since the financial crisis, U.S. stocks have outperformed European stocks by the largest margin on record.

In the January issue of his $3,000-per-year True Wealth Systems advisory, Steve said it was only a matter of time before European stocks closed this gap... And history suggests these stocks could soar triple digits in the coming years as that happens. From the issue...

We're in uncharted territory today. The U.S.'s outperformance has never been anywhere near this large. But history's less extreme examples point to big gains ahead in European stocks...

2002 was the last time the U.S. outperformed by nearly 50 percentage points over eight years. What happened next? A massive multiyear bull market in European stocks... If you'd waited for the uptrend before buying, then you would have bought European stocks in mid-2003. By late 2007, you would have made 172% gains. U.S. stocks returned just 74% over the same period.

A similar opportunity appeared in late 1998... And European stocks jumped 64% in 18 months back then. Today's opportunity is more extreme than either of those cases.

Again, it's still early, but more and more data suggest Steve's prediction is already playing out... And True Wealth Systems subscribers are benefiting. Steve's two favorite European stocks are up 28% and 12% in a little more than four months so far.

Steve has been all over the move in emerging markets, too...

In fact, one month later – in the February issue of True Wealth Systems – he highlighted a similar situation setting up in emerging market stocks. From the issue...

The MSCI Emerging Markets Index rose 8.6% last year... its first positive year since 2012. But it underperformed the S&P 500 – again – for the fourth straight year.

The last time emerging markets underperformed the U.S. market for four straight years was 1995-1998. You can guess what happened next... The MSCI Emerging Markets Index soared 64% in 1999. It went on to outperform the U.S. market for 10 of the next 12 years. It entered a bull market that led to 400%-plus gains.

In short, buying emerging markets after years of underperformance has led to incredible returns in the past.

True Wealth Systems subscribers are already up 9% in Steve's preferred emerging market recommendation in a little more than three months.

As we noted earlier, Steve's research in True Wealth Systems costs $3,000 per year.

But you may not realize there's a way to gain access to some of Steve's top investment ideas for less than 1% of that price.

It's something of a "loophole"... and we've rarely promoted it. But for the past few years, Steve has been sharing some of his favorite recommendations with a select group of subscribers each morning.

And Steve doesn't just limit what he shares to his three publications – True Wealth, True Wealth Systems, and True Wealth China Opportunities – either. He searches the entire Stansberry Research universe and picks out his favorites, based on what's currently happening in the market.

Sometimes he'll share ideas from one of our founder Porter Stansberry's services, including Stansberry's Investment Advisory, Stansberry Alpha, and Stansberry Gold & Silver Investor.

The day's idea occasionally comes from Dr. David Eifrig's publications... like an exciting new opportunity from Retirement Millionaire or Income Intelligence.

It could also be one of Dan Ferris' recent Extreme Value recommendations... or a creative way to play the energy markets from Flavious Smith, a 30-year oil insider and editor of our Stansberry Research Resource Report.

For a limited time, you can take advantage of this loophole, too...

Each morning, Steve will send you a short write-up on his favorite idea in the market that day. In less than five minutes, you'll learn everything you need to capitalize on it... And if you like what Steve says, you'll have plenty of time to act when the markets open.

Altogether, this research would cost you more than $25,000 to purchase separately. But right now, you can gain access to these top ideas for just $25. Learn more here.

Regards,

Justin Brill

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