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While we’ve been enjoying the runaway bull market here in the states, European bond rates have started to creep higher. Investor are increasingly concerned with the sharp moves in yields over the last couple of weeks. It seems that there is some carryover to equity markets across the pond as well.

Since the beginning of the year, the FTSE over in London and the DAX in Germany have tracked relatively in step with our domestic market. However, there has been some divergence between the indexes that seemed to start in June of this year. The chart below shows the relative performance of the three indexes with the S&P 500 in bars, DAX in yellow and FTSE in blue.




My question is do you think the European markets are leading the way down and the S&P will soon follow, or will European markets rise to close the gap?

I think that the liquidity conditions present in the market here and in Europe should lead to continued bull markets in both locations. Draghi’s recent announcement of negative interest rates and ZIRP here in the US for as long as it may last both allow for a continued stock market run.
 

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