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Where are the world's cheapest stock markets right now?

In this video, Duncan Lamont assesses the state of valuations around the world following the rallies of the first quarter.

09/05/2019

Duncan Lamont, CFA

Duncan Lamont, CFA

Head of Research and Analytics

Contributes to
Unstructured Learning Time

CPD Accredited

The final few months of 2018 were carnage for stock market investors. Everything was falling and the emotional chimp inside people’s heads was screaming ‘sell’. But for those that were able to resist that emotional urge, the first three months of 2019 have been a really fruitful time to be invested.

Japanese equities are up 8%. UK, Europe and emerging markets are up 10%, give or take, and the US almost 14%. But the problem for long-term investors is that strong performance means that everything has just got that bit more expensive.

Valuations are one of the most powerful indicators of long-term returns, even if they are pretty useless at telling you what will happen in the short run. So where does this leave things for the long-term investor?

First things first, expected returns are lower across the board but things don’t actually look quite so bad. Japan and emerging markets are actually slightly cheap. UK and Europe are only slightly expensive. The US does stand apart by appearing more expensive but betting against that market has been a losing trade for years.

So, with the lack of valuation signals, a more appropriate strategy now is actually to balance your portfolio across multiple markets. Spread your risk and avoid putting all your eggs in one basket.

  • If you want to find out more you can find the full article here.