Relative strength is simply the measurement of an item or items relative to a common benchmark. One of the more tasty applications of relative strength is the Economist’s Big Mac Index. In short, this index compares the price of a Big Mac (in US$ equivalent) in various foreign countries to the price of a Big Mac here in the United States.
As the most recent article points out, the lowest relative prices for Big Macs are in Asia and the highest are in Europe. It is not surprising that China, where the Big Mac is $1.83, is exporting so many other goods to us here in the U.S. where the same burger goes for $3.57. The Economist updates their burger index each quarter and it will be interesting to see how the prices change as the world continues to deal with the tumultuous global economy.
Local has become global—and vice versa. It makes sense to consider a tactical investment approach that can cope with new environments.
