IN THE last few weeks, the US has seen its credit rating downgraded, revisions have written off part of the recovery in GDP since the recession and Washington has succeeded in making its political system look dysfunctional. And yet who would expect to under perform: German DAX or the US SP 500 Index?

The German DAX is down nearly 20% for the year while the S&P is barely down 4% for the year.

Gerry Fowler, the head of equity derivatives strategy at BNP Paribas, thinks there may be a technical explanation. US investors are nervous about the European outlook but the adoption of short-selling bans in many countries means they can no longer go short of the Eurostoxx 50, the broad index that covers the continent. There are no restrictions, however, on shorting the Dax so this is how they have made their bearish call.

But which market would you rather own? On the (admittedly flawed) historic price-earnings ratio, the Dax is on a 10 multiple while the S&P 500 is on 13.2, according to the FT; the dividend yield is 4.1% for the Dax and 2.7% for the S&P.

Yet another example in September 2nd’s trading. The big disappointment of the day was the non-farm payrolls, which renewed fears of a US recession. But as I write (just after noon in New York), the Dow is down just 1.4% while the Dax closed with a 3.4% fall. Go figure.

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AG
Capital3x.com