Low Correlation: S&P 500 and EAFE
EAFE stands for Europe, Australia and the Far East. As we know, there are a lot of “scary” economic signals in Europe and China (the Chinese correlations are largely “under cover” and buried by the central government there, but they have real issues). Yet, there is an analysis done since 1971 to date, that show the annualized returns on chart graphing the S&P 500 average and the EAFE Average – there is no question about it, in the larger picture they both chart each other very approximate on the big upward and downward swings… but they are not in lockstep. Which is the point – the “low correlation” factor that investors are now seeing as a method to make “ahead of game” investments that pay dividends over the next 2 years.
Let us take China out of the picture, and focus on Taiwan and India.
PM Modi of India has been outstanding in his efforts (as far as aligning India globally for even further economic gains)! He really is a leader in this regard, seeing the “big picture” and seeing what I would call a “5 year plan” (no, not the Russian one!).
Yes, if you simply invested in the S&P 500 over the last few years, you would have been doing very well. But looking at the charts, foreign stocks in the emerging markets (Taiwan, India – avoid China), they are poised to take off. Why? Because the US Stocks (as reflected in the S&P 500) are now “expensive”, but the emerging markets are “cheap”. In addition, actually the “cheap” factor brings in Europe and Australia into the mix as great buys right now – and, here is the take on it. Investments always MOVE AHEAD of reality. So if we look at the charts, we see the S&P and EAFE tracking a similar “shape” (pattern) on the big ups and downs, but they are not directly in sync, low correlation is observed. That means, as the line in the graph goes up, both flight up, down same, but the actual “point in the X and Y” are not on the same spot. The peak on the S&P might be higher than the peak (on the exact same time frame) of the EAFE, the low likewise, this is the “gap between the two”. The gap between prior to 1995 has the EAFE on the upper side of the gap, after that until 2005 we see the S&P on the upper side of the gap, then we saw both drop exactly parallel, now they are both rising nicely with the S&P on the upper side of the gap.
Yet looking deeper, there is a predicted shift now. Because the EAFE is “cheap” compared to the S&P, and investments move ahead of reality, investors are now buying Europe, Taiwan and India. Not that they are getting out of the S&P, that is not what I am saying. But the flow of money alone will stimulate “THE SHIFT” where both the S&P and EAFE will “track on the overall line pattern”, but the gap will shift where EAFE will be on the upper side of the gap with the S&P below it (yet still tracking the same pattern).
I know this sounds complicated, but these are the hard facts.
I am buying emerging markets (which emphasis on India, and Europe) right now. On the cheap. Watch for “THE SHIFT” within the next two years. I am targeting emerging markets funds and Europac funds. England is poised to benefit from the shift if they don’t elect some nutjob leftist government. Greece is lunatic fringe; Europe will have to perhaps “shun” them.
Other things: TheStrait of Hormuz. Also (this thread is already too long but all factors in the shift), watch India, Japan, Philippines, U.K., and a bright star coming Australia.
Now back to personal things I have to attend to – life can be difficult, yes it certainly is complex.
EAFE stands for Europe, Australia and the Far East. As we know, there are a lot of “scary” economic signals in Europe and China (the Chinese correlations are largely “under cover” and buried by the central government there, but they have real issues). Yet, there is an analysis done since 1971 to date, that show the annualized returns on chart graphing the S&P 500 average and the EAFE Average – there is no question about it, in the larger picture they both chart each other very approximate on the big upward and downward swings… but they are not in lockstep. Which is the point – the “low correlation” factor that investors are now seeing as a method to make “ahead of game” investments that pay dividends over the next 2 years.
Let us take China out of the picture, and focus on Taiwan and India.
PM Modi of India has been outstanding in his efforts (as far as aligning India globally for even further economic gains)! He really is a leader in this regard, seeing the “big picture” and seeing what I would call a “5 year plan” (no, not the Russian one!).
Yes, if you simply invested in the S&P 500 over the last few years, you would have been doing very well. But looking at the charts, foreign stocks in the emerging markets (Taiwan, India – avoid China), they are poised to take off. Why? Because the US Stocks (as reflected in the S&P 500) are now “expensive”, but the emerging markets are “cheap”. In addition, actually the “cheap” factor brings in Europe and Australia into the mix as great buys right now – and, here is the take on it. Investments always MOVE AHEAD of reality. So if we look at the charts, we see the S&P and EAFE tracking a similar “shape” (pattern) on the big ups and downs, but they are not directly in sync, low correlation is observed. That means, as the line in the graph goes up, both flight up, down same, but the actual “point in the X and Y” are not on the same spot. The peak on the S&P might be higher than the peak (on the exact same time frame) of the EAFE, the low likewise, this is the “gap between the two”. The gap between prior to 1995 has the EAFE on the upper side of the gap, after that until 2005 we see the S&P on the upper side of the gap, then we saw both drop exactly parallel, now they are both rising nicely with the S&P on the upper side of the gap.
Yet looking deeper, there is a predicted shift now. Because the EAFE is “cheap” compared to the S&P, and investments move ahead of reality, investors are now buying Europe, Taiwan and India. Not that they are getting out of the S&P, that is not what I am saying. But the flow of money alone will stimulate “THE SHIFT” where both the S&P and EAFE will “track on the overall line pattern”, but the gap will shift where EAFE will be on the upper side of the gap with the S&P below it (yet still tracking the same pattern).
I know this sounds complicated, but these are the hard facts.
I am buying emerging markets (which emphasis on India, and Europe) right now. On the cheap. Watch for “THE SHIFT” within the next two years. I am targeting emerging markets funds and Europac funds. England is poised to benefit from the shift if they don’t elect some nutjob leftist government. Greece is lunatic fringe; Europe will have to perhaps “shun” them.
Other things: TheStrait of Hormuz. Also (this thread is already too long but all factors in the shift), watch India, Japan, Philippines, U.K., and a bright star coming Australia.
Now back to personal things I have to attend to – life can be difficult, yes it certainly is complex.
