While analysts trade jabs, back-and-forth, about whether the market is overvalued or not, investors in Europe are loving the discount they get when buying US stocks.
Bloomberg: The S&P 500 is priced at 19.9 times earnings, the biggest discount to the MSCI World Index of 23 developed countries since May 2003, according to monthly data compiled by Bloomberg. For Europe-based money managers, currency translations push the average cost for a dollar of U.S. profits down to 13.6 euros, the lowest level ever relative to global equities and a discount that investors in America have never enjoyed, data compiled by Bloomberg show.
Overseas investors that hold almost $2.5 trillion in U.S. equities are getting a bigger slice of corporate America with each euro, yen and pound they spend just as S&P 500 companies from PepsiCo Inc. to General Electric Co. post higher overseas sales. While more losses in the dollar would cut returns, the last time U.S. stocks were this inexpensive, in 2003, the S&P 500 began a four-year, 62 per cent advance.
Basically, this is us paying off our foreign debts. Much-need cash is getting repatriated, and in exchange, we’re giving up greater and greater chunks of our productive assets to foreigners. That’s not necessarily a bad thing. It has to happen — and it just happens to be less visible than other, more symbolic forms of having a yard sale, such as selling Manhattan real estate to the Chinese or Japanese.