Global vs US PE10 Valuations: One of the most interesting aspects of the past decade has been the divergence in valuations between the USA and the rest of the world. A big part of the divergence in price/value has been driven by a massive divergence in relative earnings performance, with the US significantly and consistently outperforming the rest of the world in earnings growth…
But while the US has outperformed rest of world in earnings over the past decade, arguably this is already in the price and then some.
US PE10 valuations (i.e. price divided by trailing 10-year average earnings) are about double that of the rest of the world, and the breadth of overvaluation shows that it is a widespread issue (more than 90% of countries are at least 20% cheaper than the US by our calculations). One thing to note on this too is that such valuation gaps can partially close by the expensive one simply “catching down” or correcting further/faster than the other… and that seems to be happening as
