On Thursday global stocks jumped to a 17-month high. Emerging market stocks have risen to an eight-month high. And I have good reason to believe that this is just the beginning.
If you remember back a few weeks ago, several major world economies reported an uptick in manufacturing—China’s manufacturing sector advanced to the highest level in seven months while Brazil manufacturing accelerated to a year high. And just yesterday we discovered that the fastest growing auto company isn’t one of the U.S.’s Big Three…but Japan’s Toyota Motor Corp. (NYSE:TM).
Above all else, the Fed’s easy money policy is also helping international stocks in a big way. The truth is that 0% interest rates, the “Fiscal Cliff” and a $1 trillion deficit is not the foundation for a strong currency. And when the dollar erodes, other currencies rally. That is great news for foreign companies because when they’re trading on U.S. exchanges, their sales are in foreign currencies have to then be converted to U.S. dollars for reporting. If those currencies are on the rise, they will get a whole lot more dollars in the currency conversion.
In the past six months, relative to the U.S. dollar…
- The Indian Rupee has risen 1.8%
- The Chinese Yuan has rallied 2%
- The British pound has advanced 3.7%
- The Euro has jumped 5.1%.
The fact that even troubled Euro is rallying strongly against the U.S. dollar speaks volumes. Because the eurozone offers higher interest rates, the Euro cracked $1.32 this week. The fact is that while the U.S. has been an oasis of economic growth over the past year, the times are changing. So going into the New Year, it’s time to refocus on more global companies.
P.S. If you’re looking to get into the fastest-growing international opportunities on the market, a good place to start is with my Global Growth newsletter. You can find full details on how to sign up for a three-month risk free trial here.