U.S. Markets Set To Underperform Foreign Markets

| About: SPDR S&P (SPY)

On the surface this sounds like a negative article on the U.S. (NYSEARCA:SPY), right?

After all, GDP of sub 2%, unemployment of 8%+ and earnings growth of low single digits should yield bad results for stocks.

Well, I'm not here to trash the U.S.

I'm here to say that the U.S. markets are set to UNDERPERFORM relative to foreign markets like Greece (NYSEARCA:GREK) (yes, the one that is on the verge of bankruptcy), Spain (NYSEARCA:EWP), Italy (NYSEARCA:EWI), and China (NYSEARCA:FXI).

Take a look at the Greek stock market:


Does this not remind you of a similar market? That is, does this not "remind" you of the U.S. in 1933?

You have a breakout above the July 2012 highs, a positive weekly MACD divergence signaling the bottom in May/June was real. And you have a market that was down over 90% from it's highs, offering up a ton of potential upside.

Take a look at the Spanish ETF, EWP:


Today EWP broke above its 200 DMA and the most recent move higher sets up yet another higher high. The "breakdown" in late July was a false breakdown to trap shorts. Notice that it reversed much higher the next day. EWP is now up about 40% from its lows 5 weeks ago.

The Italian ETF, EWI, is very similar to Spain


China looks like a text book breakout off a bottom.


Look at that breakout today. What a thing of beauty. Doesn't this look identical to the breakout in the US markets in 1982:


Setting aside our beliefs about the markets and just looking at the charts, the Chinese market looks primed for a huge run. I would recommend getting long XPP or FXI if possible.

MY Advice:

The consensus is that the US markets will provide investors with a level of security and comfort because the risks overseas are far greater. It sounds plausible because all we hear are negative stories about Europe and a major slowdown in China. Investment managers are all in agreement that the US will avoid getting hit. While this might be true, keep in mind that the US markets are up over 100% from its lows in 2009. I'd rather buy cheap and sell expensive, relatively speaking. Cheap right now is China (FXI, XPP). At a 7 P/E and a 3%+ yield, the potential return in the Shanghai composite is far greater than the US, which sports a 13+ P/E, 2% yield and record high profit margins.

Let me know your thoughts. I know how skeptical people are of all markets in general, but toss your own prejudices aside for a moment and let me know what you think.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.