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
