The talk has focused on the overvaluation and “bubble” with US stocks, but there are other relative opportunities in risky equity assets. A comparison of CAPE across the world shows that the UK, euro area, and Japan valuations are closely tied together, significantly below highs from 2008, and all relatively cheap versus US.









Note that if we compare the SPY versus MSCI EAFA and MSCI world indices, there is the same directional pattern but not the same magnitude of gains. The gain in favor of the US over 5 years is respectively close to 25% and approximately 60%.







International diversification has been a drag on equity performance for many investors, but now on a valuation basis, this diversification may provide upside potential and some potential muting of a US market decline.