Dow Jones Industrial Average sees "eight consecutive gains", European and British stocks hit new highs, Hong Kong stocks outperform S&P this year - the global "value" counterattack!

Global market style rotation, stocks that were once not favored are catching up, and their common point is "cheap".

On Friday, under the dual pressure of dim US consumer data and Fed officials "hawkish" stance, among the three major US stock indexes, the Nasdaq fell, the S&P 500 fluctuated multiple times intraday before barely closing up, while the Dow continued its recent strength, closing up 0.32%, rising for eight consecutive trading days.

In the past week, the Dow rose by 2.16%, marking the largest weekly gain since December 15, 2023, rising for four consecutive weeks. The ETF tracking the Dow, SPDR Dow Jones Industrial Average ETF Trust (DIA), has risen by 2.77% in the past month.

European stocks have also been performing very well recently. On Friday, the STOXX 600 index in Europe hit a new closing high for the fourth consecutive day, and the ETF tracking the Eurozone stock market, iShares MSCI Eurozone ETF (EZU), reached its highest closing price since June 2008.

The UK stock market has also turned the tide from last year and is showing strong performance. Since the beginning of the year, the FTSE 100 index has risen by over 9%, hitting a historical high.

Hong Kong stocks have been particularly eye-catching, rising more than 20% from the low point in January, entering a bull market. Year-to-date, the Hang Seng Index has surged by 13%, significantly outperforming the S&P 500 index (9.94%), leading by a wide margin among major global stock markets.

The common point is "cheap"

Being relatively cheap is the common advantage of these stocks.

UBS strategist Andrew Garthwaite's strategy team recently stated that they now prefer European stocks over US stocks, partly because, from a valuation perspective, based on industry-adjusted P/E ratios, European stocks are cheaper, with a valuation 18% lower than US stocks.

For the UK stock market, in addition to being boosted by expectations of a rate cut by the Bank of England ahead of the Fed, the relatively lower valuation compared to global peers is the key factor driving the rise of the FTSE 100.

The current average P/E ratio of the FTSE 100 is 11 times, lower than the long-term average of 12.8 times.

The undervalued UK stock market has attracted value-seeking investors and companies. According to Peel Hunt research data, there are currently 21 companies in the merger process, with 12 belonging to the FTSE 350 XTB's research director Kathleen Brooks pointed out that more mergers and acquisitions are bringing premiums to undervalued UK stocks, which is another attractive reason for investors in the FTSE 100.

The reason behind the Dow Jones Industrial Average's "eight consecutive gains" may also be its long-term underperformance compared to the S&P 500 and Nasdaq, giving it a "cheap" advantage.

The Dow Jones Industrial Average includes 30 of the most influential and industry-representative American companies, but it is often seen as representing companies that were once considered great, while the S&P 500 is dominated by companies currently seen as leaders. In other words, the Dow represents the "old economy," while the S&P 500 represents the "new economy."

Over the past 4 and a half years, the Dow has risen by 41%, while the S&P has risen by 68% during the same period. Last month, the gap between the two reached 30 percentage points, the largest since the dot-com bubble. Media analysis indicates that such a large gap often heralds a turning point.

Currently, the Dow's lag behind the S&P has narrowed to 5 percentage points.

The Dow is price-weighted, which means that tech giants like Nvidia and Google may not be included in the Dow because of their high stock prices. In the tech-dominated US stock market, this is a "fatal weakness" for the Dow, but when the market trend changes, weaknesses can also turn into strengths, becoming a safe haven for investors to avoid valuation bubbles.

During the dot-com bubble, Cisco's stock price more than tripled in a year, making it the third largest company by market capitalization at the time, but it was not included in the Dow. However, after the bubble burst, Cisco's stock fell by 89%