Markets give all clear nod to international stocks

International markets appear to have cheered the pause in the fed tightening campaign, as they have resumed their climb prior to the May selloff. MSCI EAFE is up just over 10% on the year while the S&P is barely above where it began the year (up 0.2%). The increasing US-World spread seems to correspond with the increase in implied odds of a Fed pause. Didn't have the time to put that graph together, but it would be interesting to look at. Here is the last 6 months of EAFE performance vs. the S&P:


I commented yesterday how US markets seemed to be overly optimistic regarding the end of the tightening cycle (not reflecting enough the culprit for the pause, namely slow growth), and that bug seems to have bitten international markets of late. Ticker sense had an updated version of their global ETF overbought/oversold indicator, and it is interesting to note that two of the countries that register as "overbought" and have shown some of the largest pickup since the Fed announcement are our neighbors - Mexico and Canada. US markets have had muted response to the Fed pause, and I can't help but wonder if jumping into Canadian and Mexican markets isn't just a bit premature with dim US growth prospects. The full effects of the most recent increase to 5.25% have yet to be felt, and the coming slowdown in the US is certain to impact both of those countries greatly. It will be interesting to see if Mexico and Canada continue to run with the international crowd or if they come back down to earth with the US.