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Now onto the Quarterly CAPE Ratio Updates!
After another monster year of performance in 2017, many countries are still quite cheap. But some countries are expensive too…let’s go right to the stats!
Median CAPE Ratio: 18.6
25% most expensive: 27.3 (U.S. in this bucket)
25% cheapest 12.6
Average of Foreign Developed 21
Average of Foreign Emerging 17
We’ve mentioned this a lot in the past but bears repeating. We use the MSCI Investable Market Indices below, but MSCI also calculates their Standard Indices too. IMI includes more companies and in general is more representative of the entire market. It really makes no difference for any of the countries except the very smallest ones, such as Greece and Egypt. For both series the CAPE ratios are almost always near identical, with one glaring exception – again, Greece, which depending on the series you use has a CAPE ratio of -7 or 2.
So, this is one reason we have always used a valuation composite across the variables below. If one is giving a screwy result, or perhaps a market has a structural bias to one variable, we want to average it out. So, in this case Greece is cheapest on CAPD, CAPB, and CAPCF, just not on CAPE.
The cheap stuff is still dominated by Europe…but some other names have been creeping in over the past year…
MSCI Investable Market Indices
|CAPE||CAPD||CAPCF||CAPB||Average Rank||Dev or Emerging||Real Drawdown %|
|S&P 500||Current P/E|