Global Equity Valuation Charts

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Global Equity Valuation Charts
If it has felt like global equities have done well this year that’s probably because they have.  The MSCI All Countries World Index is up 15.7% in local currency terms YTD (18.4% in USD terms), and is now up about 40% off the February 2016 bottom.  With rising prices comes rising valuations, but there are some subtleties to the valuation picture across the world for global equities.

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Looking at the PE10 ratio (price divided by the rolling average 10-year of trailing earnings) across the major regions it's clearly USA first, with the American stockmarket reclaiming the valuation heights of the 2007 top and the early stages of the dot com boom.  Elsewhere Developed Markets ex-USA are lagging behind, and Emerging Markets are at the bottom rung.  This is a key reason why our view is favor global equities ex-US on a relative value basis (Japan, Europe, and Emerging Markets).
Another key metric we track is the breadth of valuations across countries for global equities, at this point there are more countries showing up as "expensive" under the simplistic definition of having a forward PE ratio of at least 1 standard deviation higher than the long term average. The chart shows this indicator climbing to levels where previous tops set in for global equities, yet still below the levels seen in the 90's.
For more on our approach to analyzing global equities, see "Global Equity Breadth Beyond Price"
Global Equity Valuations: the PE10 valuation picture across the major regions/markets.

Global equity valuation breadth shows a rising proportion of countries showing up as expensive relative to history - notably around levels seen at the 2007 major market top and the 2015 top.

For more and deeper insights on global economics and asset allocation, and some more good charts you may want to subscribe to the Weekly Macro Themes.  Click through for free look or a trial.

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Topdown Charts: "chart driven macro insights" Based in Queenstown, New Zealand, Topdown Charts brings you independent research and analysis on global macro themes and trends. Topdown Charts covers multiple economies, markets, and asset classes with a distinct chart-driven focus. We are not bound by technical or fundamental dogma, and instead look to leverage any relevant factor to capture the theme. As such, here you will find some posts that are purely technical strategy, some that just cover economics and data, and some posts that use multiple inputs to tell the story and identify the opportunities. Callum Thomas Head of Research Callum is the founder of Topdown Charts. He previously worked in investment strategy and asset allocation at AMP Capital in the Multi-Asset division. Callum has a passion for global macro investing and has developed strong research and analytical expertise across economies and asset classes. Callum's approach is to utilise a blend of factors to inform the macro view.

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