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Exceptionally Fortunate

July 31, 2012 by Four Percent

Michael Santoli, Barron's The concept of "American exceptionalism" has re-entered heavy rotation in the news cycle, debated with the lopsided heat-to-light ratio typical of campaign years. (For proof, enter the phrase in your algorithmically unbiased Google search box.) Less discussed is the starkly exceptional performance of American equities, compared with most other world stock markets, and the question of whether it will continue. Following the late-week buying and short-covering spree that lifted the S&P 1.7% last week, to 1,386, only about 2.3% off its 2012 high, the benchmark is up 10.2% in 2012. This is among the best runs of any major market, with the EuroStoxx index off fractionally in euros and more than 5% in dollars, thanks to the U.S. currency's strength. Japan is flat, China is slightly underwater, Brazil's sitting on narrow losses. Clearly, scared capital is migrating to where it expects to be treated less badly, and the U.S. markets are so far soothing it as best they can, as are other perceived stable venues such as Germany (without which the Europe index would be dramatically lower), Sweden, Switzerland, and Singapore.The rotation benefiting America is part of the global surge in stability-seeking and defense-playing. And why not, given the well-capitalized, liquid, easy-to-understand profile of U.S. multinational blue chips? Also, America is really the only country with domestically geared companies both somewhat buffered from global capital markets stress and big enough for a global investor to own. Read More