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Nov. 6, 2017, 9:31 a.m. EST

The case for going on ‘global breakout watch’ — and still betting on U.S. stocks

When Europe outperforms, S&P 500 is up 88% of the time, analyst notes

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By Victor Reklaitis, MarketWatch


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German stocks are players in what’s seen as a “global breakout.”

While non-U.S. stocks look promising, investors shouldn’t ditch American equities as they go abroad, according to one analyst.

“We often hear that the opportunity is overseas based on attractive valuations,” said Oppenheimer & Co. technical analyst Ari Wald in a weekend note.

“We believe that if this view proves correct, then taking a cautious stance on the U.S. based on elevated multiples is misguided advice, because a bet on the world is often a bet on the U.S.”

History suggests the S&P 500 /zigman2/quotes/210599714/realtime SPX +0.02%   — the main U.S. stock gauge — won’t stumble while Europe soars, Wald said.

“The S&P has gained in 88% of all rolling 52-week periods since 1987 when Europe outperforms vs. the S&P,” he wrote.

The picture overseas is indeed encouraging, the analyst added. The number of global markets rallying to new all-time highs is growing, Wald said as he offered the graphic below.

Japan, Germany, Canada, South Korea...

Wald also provided a second graphic, with both titled “Global Breakout Watch.” The foreign stock benchmarks he highlighted include Germany’s DAX /zigman2/quotes/210597999/delayed DX:DAX -0.02% , Japan’s /zigman2/quotes/210597971/delayed JP:NIK -2.66%  and Canada’s S&P/TSX /zigman2/quotes/210598478/delayed CA:GSPTSE -2.75%  .

U.K., India, Hong Kong, France...

Many strategists have beaten the drum this year for non-U.S. stocks, saying foreign equities look like bargains while the American market’s rally seems overdone.

Read more: Overseas stocks are still where the bargains are for U.S. investors

And see: Foreign stocks are more attractive than U.S. shares in at least three ways

/zigman2/quotes/210599714/realtime
US : S&P US
3,693.92
+0.69 +0.02%
Volume: 2.22B
Sept. 26, 2022 9:42a
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/zigman2/quotes/210597999/delayed
DAX
DX : Xetra Indices
12,281.55
-2.64 -0.02%
Volume: 33,037
Sept. 26, 2022 3:27p
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/zigman2/quotes/210597971/delayed
JP : Nikkei
26,431.55
-722.28 -2.66%
Volume: 0.00
Sept. 26, 2022 3:15p
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/zigman2/quotes/210598478/delayed
CA : Canada: Toronto
18,480.98
-521.70 -2.75%
Volume: 324.44M
Sept. 23, 2022 4:55p
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Victor Reklaitis is a London-based markets writer for MarketWatch. Follow him on Twitter @VicRek.

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