Investors Ditch The Dow And Head For The DAX

For the past 6 years, the United States market has been running with the bulls. However, the year 2015 seems to be bringing about a reversal. Throughout the year, we've seen declines in United States stocks. However, when investors pull money out of one area, it tends to go to another; and in this particular place, it seems to be going to the DAX. As a matter of fact, throughout the year, the Dow has remained relatively stagnant while the DAX has gained 17%. Today, we'll talk about why investors are running away from US stocks and looking to European markets for growth; as well as how long this trend is likely to last. So, let's get right to it…

Why Investors Are Ditching The Dow For The DAX

There are several reasons that European stocks are looking more attractive to investors than United States stocks…

Exchange Rates – First and foremost, we've talked quite a bit about the strength of the US dollar as of late and how the strong dollar has been causing pain for several US stocks. The reality is that the strong US dollar means that products coming from the nation are more expensive elsewhere. This has caused quite a bit of pain with regard to exports in the United States. However, the European economy is heavily influenced by exports; and they aren't experiencing the strength in currency that the US is dealing with. As a matter of fact, throughout the year, the Euro has lost ground against the US dollar. As a result, European products are becoming less expensive in other nations. With that in mind, exports in the Eurozone are doing great!

Economic Policy – Another major factor at play here is economic policy. The reality is that a big driver for the growth we've seen in the United States market is economic policy. Low interest rates coupled with quantitative easing gave investors a reason to expect growth; which turned into more of a self fulfilling prophecy. Investors expect it, therefore they make it happen! However, quantitative easing ended in 2014 and the big discussion with regard to US stocks throughout the year has been the fact that the Federal Reserve plans to increase interest rates. Ultimately, this has put a damper on growth. However, in Europe, we're seeing the exact opposite. The reality is that the European economy has struggled. As a result, the European Central Bank enacted stimulus of its own; ultimately giving investors a reason to drive growth in the European market.

Valuation Concerns – Finally, we've heard quite a bit about valuations in the United States recently. The bottom line is that valuations in the market are incredibly high; and investors are starting to become increasingly concerned. The reality is that all signs are pointing to a correction in the US stock market. Therefore, investors are looking for growth elsewhere; and European markets are overwhelmingly appealing.

How Long Is This Likely To Last?

That's the million dollar question my friends; and I have to be honest here… I can't see into the future. The bottom line is that no one knows for certain how long these types of trends will last. However, I can say that I'd be incredibly surprised if we saw any reversal in the trend throughout the rest of the year. The bottom line is that there's a big mess to clean up in US markets and that's going to take some time. There's also plenty more room for upward momentum in Europe given the state of the market as it stands. So, I'm not expecting to see any major changes to the trends any time soon.

What Do You Think?

How long do you think investors will be ditching the Dow for the Dax? Let us know in the comments below!