Put some money in Europe

In a first since early 2013, non-US stocks are leading American. UK stocks are a hair ahead but eurozone shares are surging. Time to look beyond your own shores and put some money on the Continent.

Not because Europe is outperforming - heat-chasing is foolish. Europe's recent returns simply show why global diversification is vital. Leadership flip-flops over time. Invest in just one or two countries, and you miss opportunities while suffering when those few locations lag. Global is steadier.

Don't shun America. Recent trends could easily reverse, and big US stocks have big opportunities. Today looks much like the mid-to-late 1990s, when huge US stocks shone brightest. Strong dollar, gridlocked government, technology leadership, energy weakness and much more. And now US stocks are unpopular with all the cool folks, usually a sign the time to shine is nigh. With America having 58% of the developed world's market it's simply silly and largely arrogant to own little or no American.

Keep some in Britain

But you also need a huge chunk outside the US. Keep some in Britain - plenty to like in British banks and pharmaceuticals. But surely cross the Channel. I've liked eurozone stocks a long time, and they should have plenty of gas left in the tank. Their leadership is so new as to hardly count as a run. Deflation-obsessed lost-decade-ophobes are depressed for no reason. The Conference Board's Leading Economic Index (LEI) for Europe is high and keeps rising - has been throughout deflation doom-mongering. LEI, as usual, was right. Eurozone GDP rose seven straight quarters, and first-quarter indicators look growthy.

The media rarely reports and never believes LEI. They predict and report based more on gloomy lagging secular phenomena. For years it was the debt crisis and potential splintering of the euro. Now it's the deflation bogeyman. If low oil prices keep CPI negative, they'll warn quantitative easing (QE) isn't working. They'll probably say it's inflating a stock bubble and nothing else, just like they said in America. It will be wrong, but it does you a favor - media-hyped false fears keep sentiment down, extending the wall of worry. As high as eurozone stocks have climbed this year, they still have a big wall of worry ahead. Buy it.

Don't bet on Japan

Japan is the opposite - many irrational hopes. Japan has been a basketcase since 1997. Those betting on a turnaround now are betting on hot air, like QE - in reality a yield-curve-flattening disaster, just like it was in 2001-2006. Optimists love the weak yen, but it boosted export values only - export volumes are shrinking. No stimulus there! They think Prime Minister Shinzo Abe is a Thatcheresque economic reformer - wrong! He's all talk, no action, and would rather spend his dwindling political capital on removing the constitution's anti-war clause. They think more stock-buying from the central bank and national pension fund will push prices higher - also wrong! For every buyer, there is a seller, and those stock-buying plans have been widely known for eons. They're priced in.

False hopes are as bad for stocks as false fears are good. False hope drove Japan's early 2013 rally - it fizzled as reality disappointed. Expect the same now. Still, Japan is 8% of the world market so own a big Japanese multinational or two just in case, but keep your exposure small.

Two stocks to add

Here are another two stocks to add to the list I've given you each month:

Unilever, the British-Dutch food conglomerate, has lagged since 2013 as sales and dividends declined. But better times are coming for this global giant with over 400 great consumer brands. Consumer discretionary stocks usually shine in the back half of bull markets. It's time. Expectations are low, and it's nicely priced, particularly against peers. Even now its dividend yield is 3.4%.

Silicon Valley-based Xilinx is small but owns half the nice niche of programmable logic chips (distinguished by being reconfigurable). It had a fine run in 2012 but has now fallen back. If it doesn't get the price back up, it should be taken over readily. Don't fall for false tech bubble fears. Just enjoy owning a 2.8% dividend yield at 17 times growing earnings.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.