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For an area of the world that couldn’t have been considered less attractive last summer, European equities have been on a tear since the October lows. The Euro Stoxx 50 Europe ETF (FEZ) has now rallied more than 50% off its October lows, and it even broke out to 52-week highs last week.

The S&P 500, meanwhile, hasn’t fared nearly as well. While it has formed a gradual uptrend from its October lows, SPY currently has three prior highs (February 2023, August 2022, and April 2022) standing between it and 52-week highs.

Other parts of the global equity market spectrum haven’t been able to keep up with Europe, either. Emerging markets, as tracked by the iShares MSCI Emerging Markets ETF (EEM), rallied sharply off its lows in October, but that rally ran out of gas in early February and hasn’t been able to recover. Like the S&P 500, EEM remains well below 52-week highs from last April.

Since Europe accounts for a major share of international equity market cap, the MSCI All Country World Ex US ETF (CWI) is much closer to 52-week highs than EEM, but it still has a number of resistance points to clear.

The chart below compares the relative strength of all three ETFs (FEZ, EEM, CWI) to the S&P 500 (SPY) over the last three years and provides a clear look at how Europe has led the global rally. From April 2020 through April 2021, all three ETFs outperformed the S&P 500, but then they really started to underperform as the US economy reopened and the FOMC later started to hike rates.

Last October was the major turning point for global stocks, though, as the relative strength for all three ETFs made multi-year lows. While they’ve all started to reverse, only Europe has managed to erase all of its underperformance from the post-COVID-19 period and move into the black versus the S&P.

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