One of the key distinctions between U.S. stocks and the U.S. economy is exposure to overseas economies.
Indeed, stock market strategists have pointed out for years that the stock market's exposure to high-growth foreign economies is a reason to be bullish on stocks.
However, this argument has not held in the past year.
Jonathan Golub, Chief U.S. Equity Strategist for UBS, recently wrote about it in a note to clients:
"Over the past 20 years, companies with larger foreign footprints have generally grown faster than those with less global exposure. However, following the onset of the financial crisis and the ensuing global recession, domestically-oriented companies have outperformed their more foreign-exposed peers...
Over the past two years in particular, global macro risks have re-escalated as the European Union has battled sovereign debt issues and emerging markets have faced slowing demand. By contrast, the U.S. has experienced a modest, less turbulent recovery. As a result, more domestically-exposed names have exceeded expectations by a greater amount on both top- and bottom-lines.
This strength is now evident in growth rates as well. More specifically, 2Q earnings and revenue growth has outpaced that of more foreign-exposed names by roughly 5-6%. Given continuing challenges in the global economic environment, we expect this pattern to persist through the end of the year."
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