Is The Eurozone's 'Recent' Underperformance Something to Sweat?

While our core Eurozone ETF (FEZ) has produced a substantially higher year-to-date return versus the U.S. market (5.9% better as of this morning), the past few weeks have been an altogether different story (FEZ was better by a whopping 11.4% on 5/19).

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As we illustrated for you in this week's message, it's important to match the near-term technical analysis with the macroeconomic backdrop. In this case, we'd be assessing the state of the Eurozone economy against what of late has been a relative (to the U.S.) underperformance of its equity markets.

We maintain a file for every month titled "Current Trends", in which we place economic data that we gather from a variety of sources. We title each entry in a manner that reflects the tone of the information.

Here are the titles related to developed Europe, in chronological order, back to the start of May. As you can see, save for the unsurprising red flags surrounding the UK and "Brexit", the economic backdrop generally continues to justify our present 18% of equities target:

MAY 2017
Europe's PMI Shows Economic Strength
Eurozone Retail PMI Surging
The European Commission Optimistic On Economy Going Forward
Germany's Economy Is Looking Very Good!
Eurozone Corporate Earnings Have Huge Upside If They're To Get Back To 2007 Level
Money Pouring Into European Equities
The Eurozone's Economic Outperformance (in my view [more so than this source's]) Largely Explains The Euro's Outperformance Vs The Dollar
UK Data Not Good And Inflation Is An Issue (read weak pound)
Eurozone Labor Market Improving Markedly, Britain Retail Sales Surprise To The Upside
Eurozone Data Continues To Point To Good Things Economically
Eurozone Looks Very Good Economically
The Data Continues To Point To An Improving Eurozone Economy
JUNE 2017
Global Manufacturing PMIs Look, On Balance, Very Good... Particularly Europe's
Eurozone Best G3 Economy in Q1. And Prospects Look Good Going Forward
Italy Remains Europe's Major Political Risk As Populists Lose Ground Elsewhere
Eurozone Economy Clicking Along Impressively, Although Sentiment Is A Bit Soft. UK A Mixed Bag With Heightened Risk Via Brexit
UK Employment Stats, Inflation And The Pound Look Problematic, To Say The Least!
Eurozone Employment Very Strong!
Eurozone Trade Data Says Could See Economic Softening In Coming Weeks
CPI Numbers In Eurozone Do Not Threaten Easy Monetary Policy Stance
European Economic Data Continues To Come In Broadly Positive
European Data Continues To Come In Strong
Eurozone Preliminary Consumer Confidence Reading Best Since 2001


Back to the technicals: 
From a longer-term trend standpoint, this is a very bullish look for FEZ: