Valuation Gaps and Global Maps

+ Mohamed El-Erian, Eugene Fama, Tony Deden, Savita Subramanian & More

Author

The Idea Farm
January 26, 2025

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“There are only two reasons companies behave well: because they want to and because they have to. Our preference is to invest in those that want to.”

— Nick Sleep

Research

Goldman’s Investment Strategy Group analyzes the widening gap between the U.S. and the rest of the world across a number of economic and financial metrics, the implications of the the divergent paths of global economies, and the outlook for global markets.

Norbert Keimling looks at the global stock market's valuation differences, highlighting that U.S. equities remain significantly overvalued compared to other regions, even after adjusting for sector composition.

The chart shows the relationship between the Shiller-CAPE and the returns of the subsequent 10-15 years for the period 1979-2022. All returns are adjusted for inflation, in local currency, incl. dividend income and annualized. Source: Taunus Trust; as of 12/30/2022.

Facts & Figures

“Annual all-in costs for ETFs are 1.2% lower than mutual funds....We estimate that ETFs have helped save investors $250bn in taxes, even when accounting for the 57% of mutual funds currently held in tax-sheltered accounts by US households.” Link

Almost 90% of Americans start their day by reaching for their smartphones within 10 minutes of waking. Link

More than 20% of new US jobs are now created by the government, up from 1% in the 2010s. Link

The federal government owns 85% of the land in Nevada, 46% in California, and 0% in New York. Link

The value spread has decreased slightly since the peak (Nov 21), being now at the 90th percentile. However, it is still slightly wider than at the peak of the dot-com bubble in 2000. Link

If there is a recession in Europe and a continued slowdown in China, it will have a significant negative impact on earnings for S&P 500 companies. Link

Source: FactSet, Apollo Chief Economist. As of January 12, 2025]

2024 was the 3rd highest average sentiment on stocks going back to 1964.

As of Jan 9, 2025

The S&P GSCI Gold and S&P 500 returned 26.6% and 25% in 2024, respectively. Link

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Podcasts

1/9/25 - 55 minutes

El-Erian discusses the resilience of the US economy, his own investing missteps with Bitcoin, and his advice on portfolio construction in 2025.

12/31/24 - 55 minutes

Eugene Fama discusses the nuances of market efficiency, behavioral finance, bubbles, the housing market and more.

1/11/25 - 97 minutes

Tony Deden shares his investment philosophy, the importance of understanding businesses and why he avoids speculation.

What Else Is Happening

Webinar: Unlocking the Potential Benefits of Managed Futures

Meb Faber and Jerry Parker will host a webinar on Thursday, January 30 at 2pm ET to explore the role of managed futures in modern investment strategies and provide insights into the Cambria Chesapeake Pure Trend ETF (MFUT). Register here.

Distributed by Foreside Fund Services LLC. https://www.cambriafunds.com/mfut