For the past five years there were reasonable arguments for keeping money in the United States.

While the United States endured a brutal recession and it is still suffering through an anemic recovery, on a relative basis the economy has been a bright spot, particularly compared to Europe and Japan.

Since the end of the recession corporations have churned out record profits, the dollar has been stable, and interest rates remain near historic lows.

In the past few years, having a strong US focus has been a good trade. Since exiting the recession in mid-2009, US stocks have significantly outperformed international markets.

But this trend is starting to break. Since the summer, US stocks have trailed stocks overseas. In the three months between the end of August and the end of November, US stocks gained less than 1% as measured by the S&P 500 versus a 5.5% advance for the MSCI ACWI-ex US Index.

I believe this trend is likely to continue. While US stocks still appear reasonably priced, and downright cheap compared to fixed-income alternatives, they are relatively expensive compared with other countries. US large caps trade for 2.1 times book value compared with 1.45 for the rest of the world. This represents a 47% premium, which is well above the five-year average. US stocks look particularly pricey compared to Europe, which has a price-to-book ratio of 1.16; Japan with a P/B ratio of 0.96, and emerging markets with a P/B ratio of 1.56.

Some of the premium is justified. As I mentioned, US companies maintain near-record profitability. Assuming the fiscal cliff is avoided, the United States is almost certain to grow significantly faster in 2013 than either Europe or Japan.

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