Bubble Trouble? 2007 Vs 2014 Stock Market Valuations by Steven DeKlerck Alsofollow him on Twitter here
The first graph in the presentation shows stock market valuations at the end of August 2014 for 33 countries in the world. In the countries indicated in red I find that current valuations lie above the 80th percentile, given their valuations over the past 20 to 25 years. In the red area we observe a cluster of developed markets (such as Canada, Switzerland, Australia, the UK and the US) and a lot of countries in South-East Asia (such as Thailand, Singapore, Malaysia, the Philippines, India and Indonesia). The valuations in these latter countries are almost nearly as high as before the onset of the Asian financial crisis in 1997-1998 – which is an indisputable warning for investors. The average of the percentiles for the 33 countries amounts to a lofty 67%.-
In the second chart I compare current valuations with those at the end of August 2007, close to the peak of the global stock market bubble at the time. In August 2007 the average of the percentiles for the 33 countries came to 81% (!), a truly global bubble, as emphasized many times by Dr. Marc Faber in his writings.
In order to better compare the current valuations and these at the end of August 2007 – in the third chart – I subtract the percentile at the end of August 2007 from the current percentile. Countries with negative values are characterized by lower current valuations compared to August 2007; countries with positive values are confronted with higher current valuations. For 10 countries current valuations are significantly lower compared to their valuations at the end of August 2007. This is the case for Russia (naturally, given the sanctions by the great European leaders further aggravating the already disastrous economic and social situation in many European countries), Portugal, Austria, New Zealand, Poland, Hong Kong, Norway, Israel, Japan and France. For fewer countries, current valuations are significantly above their valuations at the end of August 2007. This is notably the case for Thailand and India.
Overall I conclude that, on average, valuations of international stock markets are quite lofty at the moment, but not nearly as high compared to the valuations at the end of August 2007. Nowadays there are still some countries that – from a historical perspective – are at or below their median valuations over the past 20 to 25 years.