Economics Investing

The US vs. the Rest of the World

There has been much clamoring and consternation about stock market valuations for years now. We have commented on this extensively here and here. While stock market valuations can provide you with a sense of future returns, they aren’t very useful in identifying inflection points. For the record, we are seeing quite a few late cycles indicators so we are probably getting close to the end but it’s awfully hard to predict when that will be.

Research Affiliates put out a thought provoking piece the other day on stock market valuations, the cyclically adjusted PE ratio specifically, and how they can provide insight into future returns. Basically, US stock returns over the next 7-10 years don’t look too hot relative to the rest of the world. Definitely something to think about as most investors are overallocated to their home countries.