For long-equity investors it has been an ugly 3 months. 2008 has so far offered little to commend it to the buyer of stocks. It has been all the more galling for European investors that their own markets have underperformed the US indexes. Ok the Dow is down 8% to date, but that compares favorably with the CAC, down 16.3%, the Xetra DAX, off 19%, and the FTSE, down 11%.

AP

Didn’t the US bring us subprime? Isn’t the world fixated with the notion of the US economy slipping into recession? Aren’t the US financials in the weakest condition against their global peers?

What justifies the US markets' relative outperformance? The dollar has helped improve the profitability of companies with overseas operations, but that doesn’t explain the markets resilience.

As Alpesh Patel from Praefinium Group says, the US system is just more efficient at clearing out the deadwood. Companies are facing the reality of a slowing consumer market and responding with cost cutting and business innovation. Meantime, the Fed has stepped in as lender of last resort for the banking system.

In Europe and the UK the central banks are still unwilling to engage in encouraging 'moral hazard.' Andy Brough from Schroders says the Bank of England has a record of being late to the story and it doesn't look any more fleet-footed this time round. Interest-rate cuts will come, but by the time they arrive, so will the economic slowdown.

The central bankers should at least take note of the different stories that market levels are telling. European markets are signaling slower profit growth to come and frustration at lack of action to slow deteriorating fundamentals.

With that baggage going into the second quarter it should surprise few if US bourses again outperform their European peers.

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