Safe Haven
Although the US outperformance vs. the Rest Of The World can’t be expected to continue forever, nevertheless I find that the macro fundamentals for the US will probably be better than the rest of the Developed World (EAFE Index) for some time. Japan looks like it is coasting into a season of ugliness related to its longstanding Sovereign Debt Crisis, and Europe is not far behind. This has been driving investing flows to US equities — a kind of Safe Haven at least in terms of fundamentals (which now have a dangerously high valuation). Who is doing this? Basically, people living in the Rest Of The World, who know how bad things are there.
It’s taking a while, but German 10yr government bond yields peeked above 3.0% again, and I think they should be much higher — more like 5.0%, as in Britain.
EFA (EAFE Index ETF) vs. SPY:
