Despite climbing nearly 50% since the March lows, U.S. stocks are trailing the recovery experienced by international equities. The SPDR S&P 500 (SPY) is up 46% from March 11 compared to a 68% gain for theVanguard FTSE All-World ex-US ETF (VEU) over the same time period.
VEU tracks an index of approximately 2,200 stocks of companies in 47 countries outside the U.S., from both developed and emerging markets around the world. Top holdings include BP, HSBC and Nestle and top country exposure includes Japan, United Kingdom and France.
The lackluster performance by U.S. equities partially reflects the fact that the U.S. economy has been slower to recover from recession than other economies. Japan’s recession ended in Q2 as that country’s economy saw growth for the first time in 5 quarters. France also returned to growth although the recession worsened in the UK in Q2.
The falling dollar is another factor in relative stock prices. The dollar has declined to 0.68 euro, down from 0.80 in March. As the dollar weakens, securities denominated in foreign currencies become relatively more valuable.