00:00 Speaker A
US equities underperforming the rest of the world year to date with the iShares ACWI ETF notching gains over 5% compared to the half percent gain for the S&P year to date. So do the numbers back up the so-called sell America trade and what should investors do about it? Joining us to discuss, we've got Neil Zeus. He is Rareview Capital's founder and CIO, as well as portfolio manager of the Strategy Shares Monopoly ETF for this week's ETF report brought to you by Invesco QQQ. Thank you so much for joining us, Neil. So look, we know that investors are keen on the sell America trade, but I'm curious if you can talk about what you're seeing in terms of the flows here. Where are you seeing the most demand when it comes to equities outside of the United States?
01:57 Neil
Sure. Hi Madison, good morning. Thank you for having me. Great to be here with you. Uh, so you're right. Uh, the all-country world index or the barometer for global equity beta or the S&P 500 for, uh, the global stock market is outperforming by about four and a half to 5% year to date. It's a pretty meaningful number if you were to think about that on an annualized basis, we would get over 15%. And then when you drill down, there are a couple of places that are outperforming. Uh, primarily Europe, which takes the bulk of it. So the Euro stocks index, if you're looking at it in, uh, dollar terms, uh, it would be up around 11% or in euro exchange rate terms, 21%. So it's having a very significant out performance. And if you were to drill down further, uh, Eastern Europe or the Eastern European block, especially Poland, uh, which can take the bulk of the flows over there is really having, uh, a substantial out performance. I think up 40 to 50% of the year on a variety of factors, primarily a release in the tensions around Russia and Ukraine. And so yes, the answer is, is inflows are going into international equities and the predominant beneficiary of that is European equities and then at a more micro level, Eastern Europe. Yeah. Uh, and the, the question becomes, is it's a philosophy question, right? Do you believe in global diversification? Even after many years of that not working. And that's really the big issue in the industry at the moment. How much do you put there? Is it a fake, a head fake like every year or is this time real?
04:55 Speaker A
And this is something my guest host, Brian Levitt and I were just talking about. Brian, you got a question for Neil?
05:04 Brian
Yeah, how do the inflows compare to the amount of money that we had seen going into the United States over the last number of years? Is it, does it look to you like if this trade continues, we're early on in this rebalancing from investors, or has there been a, a significant move already?
05:46 Neil
I think that's a pretty fair question. Uh, Brian, nice to see you. Thank you. Uh, so if this was a baseball game and you had to, you know, translate what you just asked into innings, this would be like the first or the second inning. Uh, the reality is, is that the market caps in the United States are trillions of dollars overall larger than European equities. And so it doesn't take a, a lot of inflows to move those markets around. And so if this is a real event, and I would define real as not just fiscal expansion coming out of the European Commission or Germany specifically, but an earnings event where companies begin to earn a lot more money, we haven't seen anything yet. And, and, and this is by the way, after a decade of this underperformance. So, yes, you may have missed the initial low-hanging fruit, but if you believe in a secular change underway, there is significant runway.
