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European markets are doing fine in Euro terms aren’t they?
by argsnd 1y ago
European markets are doing fine in Euro terms aren’t they?
- hx8 1y agoYou should evaluate foreign market results based on your domestic currency. Here is the US centric example. 1. You exchange Dollars for Euros 2. You buy a stock in Euros 3. You hold the stock in Euros for a period of time 4. You sell the stock in Euros 5. You exchange your Euros for Dollars. The difference in the exchange rate in step 1 and 5 can have a very large impact on your total return, often times a larger impact than step 3.
- patrickhogan1 1y agoMSCI Europe is up about 8-9% in euros so far this year—roughly the same as the S&P 500 in dollars. But the euro itself has climbed ~10% YTD vs the dollar (≈ $1.02 → $1.12-1.18). So you get an ~18% gain if you invest in MSCI Europe in dollars. Europe hasn't "beaten" US stocks because its companies suddenly out-executed; most of the gap is the stronger euro. Not that it matters who’s "winning." My gripe is with US headlines that shout "Japan stocks are on fire" or "Europe stocks are on fire," when what’s really happening is that global markets are rising together and currency swings make one region look better than another.