Friday, May 1, 2015

"How Foreign Stock Markets Stack Up by Shiller P/E "

From the Wall Street Journal's Total Return blog:
More than six years into a bull market, U.S. stocks look expensive. But it looks like Poland is on sale.
Stocks in Austria, France, Italy, Japan, Malaysia, Peru, Singapore and Spain also appear relatively inexpensive, based on the cyclically adjusted price/earnings ratio, or CAPE, as calculated by Joachim Klement, chief investment officer at Wellershoff & Partners, an investment consultancy based in Zurich.
This figure is also known as the Shiller price/earnings ratio, or Shiller P/E, as it was popularized by Robert Shiller, a Yale University economist and Nobel Prize winner.

In each of those countries, the CAPE as of March was more than 20% lower than the historical average, which Mr. Klement says is a good rule of thumb for determining when the gap between the current ratio and the historical ratio really matters.

The U.S. isn’t the only place where stocks look expensive by that standard. The CAPE is well above average in Denmark, Indonesia and South Africa, according to Mr. Klement’s data. Canada, Germany, the Philippines, Switzerland, Thailand and the U.K. are among the places where it’s about average....MORE