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Sector Valuations: One Buy, One Bubble?
We updated all of our CAPE series at quarter end on Mebane Faber Research. There are no downloads in this piece as I included all of the charts in the body of the email.
First up is the CAPE values for countries around the world:
![](https://media.beehiiv.com/cdn-cgi/image/fit=scale-down,format=auto,onerror=redirect,quality=80/uploads/asset/file/cb0c80f2-2fd3-48de-9a29-100f2e62f0bc/cape3.png?t=1702399265)
The difficulty I have with a lot of indicators is just that, they are difficult. If I can’t understand what the chart is saying within a few seconds it is usually too confusing and often makes me think you’re trying to smash a square peg in a round hole.
I’m not sure why I didn’t think of this before, but below is simply the average CAPE value across all countries since 1979. As you can see, it does a great job of setting up secular and cyclical lows in the markets…
![](https://media.beehiiv.com/cdn-cgi/image/fit=scale-down,format=auto,onerror=redirect,quality=80/uploads/asset/file/5473e4ef-3565-496c-93f2-57dae5e7d353/CAPES.png?t=1702399265)
And one of the more interesting takeaways to me is that the current CAPE value correlates much better with drawdown than does the TTM E figure.
![](https://media.beehiiv.com/cdn-cgi/image/fit=scale-down,format=auto,onerror=redirect,quality=80/uploads/asset/file/75320d2c-ab6a-46ba-ab30-5ece3ed248b4/DD5e6e9a.png?t=1702399266)
Lastly, here are the sector values. Financials still pretty cheap relative to the consumer sectors…
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