Investors Prepared To Look Outside The US Can Find Stock Market Value

Investors Prepared To Look Outside The US Can Find Stock Market Value
Andrew Rummer

about 2 years ago1 min

Mentioned in story

In recent years, the US stock market has been where it’s at. Driven by seemingly endless investor appetite for American tech giants like Apple and Amazon, valuations have broken with the rest of the world’s stock markets. But what if this era of American exceptionalism is coming to an end? 

The chart’s top panel shows how price-to-earnings (P/E) ratios for US stocks tracked those outside the US pretty closely from 2009 to 2013, before steadily pulling ahead. The bottom panel shows how the ratio of non-US valuations to US valuations has dropped close to the lowest on record. 

The MSCI USA index currently trades at 21.7x this year’s projected profits, while the non-US index trades at just 15.3x. 

If your portfolio feels a little too exposed to American stocks, there are several exchange traded funds (ETFs) available that track the performance of global stocks while excluding those in the US. The Vanguard FTSE All-World ex-US ETF (ticker: VEU), for example, has an expense ratio of 0.08% and the iShares Core MSCI International Developed Markets ETF (ticker: IDEV) charges just 0.05%. 

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