US stocks have had a great year, with the S&P 500 climbing 12% since the beginning of the year.

The S&P has been outperforming the world’s developed markets, while lagging China and India.

For global investors, the question is whether or not to crank up or scale back exposure to US stocks after the massive gains we’ve already seen.

Charles Schwab’s Jeff Kleintop thinks the US current account data can help with this decision.

At a media event on Thursday, Kleintop said he’ll pay close attention to the next update on the current account — which measures trade and investment flows in and out of the US — which comes on December 17.

“US stocks outperformed international stocks when the US current account improved as a percentage of GDP,” Kleintop noted. “International stocks outperformed US stocks when the US current account worsened as a share of GDP.”

“Importantly, the current account tends to lead relative market performance by about three quarters, providing investors with ample time to adjust their portfolios ahead of any change in the performance trend,” he said.

The current account balance as a per cent of GDP has flattened recently (see the blue line in the third chart), suggesting we may be coming to an inflection point.

“US petroleum exports are soaring,” he noted. “However, the US trade balance in other goods has been rapidly deteriorating. These two factors have offset each other lately. As a result, the current account could be near a change of direction. The key to that direction in 2015 may be the dollar.”

While there may be change coming to these balances, Kleintop continues to favour US stocks over non-US stocks.

“The current account data for the third quarter will be released on December 17,” he said. “I will be watching this closely for signs of a change in direction, but for the time being the current account, relative valuations, and relative growth prospects all suggest U.S. stocks are likely to continue to outperform the broad international benchmarks.”

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