“Buy US stocks. You can’t go wrong.”
I can’t tell you how many times I heard this growing up.
Even in the early years of my career, mentors of mine would say this to me.
And I get it.
America is the heart of global innovation. It’s home to the world’s most important and dominant tech companies.
For the longest time, all you had to do was own US stocks to crush it.
But those days could be coming to an end&hellip
Just to be clear, I’m talking about all US stocks. I see tons of opportunities out there. I’m talking about the major indices.
A big reason why I’m lukewarm on the S&P 500 (SPY) and Invesco QQQ Trust (QQQ) is because of “The Magnificent 7.”
Nvidia (NVDA), Microsoft (MSFT), Apple (AAPL), Alphabet (GOOGL), Amazon (AMZN), Meta Platforms (META), and Tesla (TSLA).
These are America’s biggest, most important stocks. They drive the major indices.
And right now, they’re a weight on the market.
The chart below shows the performance of the Roundhill Big Tech ETF (MAGS).
MAGS has put in a series of lower lows and lower highs, and it’s trading below its key moving averages. It’s heavy!
Source: StockCharts
The Magnificent 7 are also weak on a relative basis. Below, we can see that MAGS has entered a downtrend relative to SPY. This means the Mag 7 names are underperforming the market.
Source: StockCharts
At the same time, international stocks are on fire.
Take a look at this chart. It shows the performance of the iShares MSCI Emerging Markets ETF (EEM) going all the way back to 2006. We can see that EEM just recently broke out of a massive base.
Source: StockCharts
I see no reason to fade this chart…
Now look at this next chart. It compares the performance of EEM with SPY. This suggests that emerging market stocks will outperform for the foreseeable future.
Source: StockCharts
My suggestion? Go abroad if you’re looking for alpha.
Justin Spittler
Chief Trader, RiskHedge
