#SaxoStrats: Long USA, short Europe
The 12-month price-to-earnings ratio between US and European equities has collapsed to 2.1%, down from an average of 18.1% in 2006-2011. Our view is that US equities should trade at a premium due to higher profitability, better visibility, higher growth, etc.
For this reason, we are looking to short Eurozone equities via the db x-trackers Stoxx Europe 600 UCITS ETF (DX2X:xetr) while going long on the S&P 500 (SP500.I).
Management and risk description
Key risks include the deterioration of US fundamentals relative to their European counterparts.
Entry: Sell 26 units of the ETF (DX2X:xetr) for every one long S&P 500 (SP500.I).
— Edited by Michael McKenna