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Welcome to Charts that Count. The US stock market in the month of November can be summed up in a single word - "yipee." Whether it was news that an effective Covid-19 vaccine could arrive as early as the springtime or news that the US would have divided and, therefore, inactive government for years to come, the market took flight. The S&P 500 rose by 11 per cent in November, its best November ever. Everyone wanted risk.
While stocks flew, defensive assets like gold and the dollar sank. But seeing the S&P 500 make new highs is not in itself all that exciting. For over 10 years the US has been host to a stonking rally. Whether the market mood is pessimistic or optimistic investors' first choice has consistently been large US corporations. In November, however, indices that have long trailed the US - in emerging markets, in Japan, in Europe - matched the performance of the S&P 500 or even surpassed it.
Now one result of this widening gap is that US stocks have become relatively expensive at about 30 times forward earnings. They are towards the top of their historical price range relative to corporate earnings. International stocks, meanwhile, are closer to those long-term averages, a feature that will appeal to value-oriented investors. Now those who have bet on international stocks closing the gap with US stocks have suffered some years of frustration and underperformance. But what happened in November suggests that maybe, just maybe, those investors' time has come.