andrewunknown

Is the US Decoupling Thesis Back On?

EUREX:DY1!   DAX Index
288 2 4
The US is the only major world equity market to surpass it's 05/22/13 swing high. Dax             , Euro Stoxx 50             and UK FTSE             are all within 3%; but most of the rest of the world isn't even close. Is the US Decoupling thesis back on? Is it tenable? And what is it that US markets inferred or sloughed off from Bernanke's taper affirmation that the rest of the world didn't get?
Hard to say what it could mean at this stage in the rally. If we were, say, a year in and this was being observed I'd say the US was poised to lead. The fact we're nearing five years in bull mode (4.5 anyway) leads me to believe this is a head-fake; a blow-off. There's definitely some minor rotation going on, especially in the Russell & NASDAQ, but no power moves per se. I view many of the above indices as proxies for mid, small, and micro cap US companies. Judging by the confluence present ex-US, I have to wonder how much of this is dollar driven. A rising dollar (which makes sense in light of rising yields) could light a fire sending the US even higher for many, many years to come - garnering safe haven type asset inflow which will reveal who's been swimming naked around the rest of the world. Will this tail risk pull the US under? Can our already extended markets handle a rising rate shock? I have no idea! What I see as likely is selling begetting more selling - a normal, healthy correction in the 15% - 20% range in S&P / DJIA to clean out the hot money chasing the market higher. The thesis still has another year plus to play out imo. I'm playing it short looking for a strong pullback that will likely attempt once more to reach infinity before central bank tomfoolery catches up to the equity markets. Just my 2 cents - thinking out loud - not gospel or my entire perspective!! Good luck everyone!
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The number one question most likely to the FED governors speaking this week will be the taper question. It will drive more speculation. US is number one carry trade out there, highly leveraged too.
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