If you think U.S. stocks are too high, you are not alone.
I have been getting questions from smart investors who think stocks are overvalued, but they are still looking for investing opportunities. Today I will answer questions regarding the French presidential election (Sunday, April 23) and the opportunities that it may provide.
To appreciate the opportunities, let us start by looking at a chart.
The chart
Please click here for the annotated chart going back seven years. It compares the S&P 500 ETF SPY, with the iShares MSCI Eurozone EZU, and Wisdom Tree Europe Hedged Equity ETF HEDJ. The election in France will have the most impact on Europe, of course, but the U.S. is not immune.
Please note from the chart that European stocks have underperformed the S&P 500 by 118% and 90% on a currency-hedged basis.
For dollar-based investors, the currency plays a big part. The euro has fallen against the dollar in the period shown on the chart. The Arora Report has a long-term short position on the Euro ETF FXE, from $134.37; FXE is trading at $103.96 as of this writing. The plan is to take more partial profits or hedge before the French election to reduce the risk.
Ask Arora: Nigam Arora answers your questions about investing in stocks, ETFs, bonds, gold and silver, oil and currencies. Have a question? Send it to Nigam Arora.
There are two nightmare scenarios that may unfold. The ultimate nightmare is the National Front’s Marine Le Pen winning and, eventually, pulling France out of the European Union (and, thus, the currency bloc). The immediate nightmare would be a May 7 runoff between Le Pen and Jean-Luc Mélenchon of Unbowed France, or France Defiant. Le Pen is far-right, anti-immigrant and protectionist. Mélenchon is far-left, and wants fewer working hours and higher wages for the French…Read more at MarketWatch
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