Below we have a table of major country ETFs ranked by a combination of valuation and momentum.
Valuation is often one of the largest factors determining long term returns, while momentum has been more predictive of the short term. By combining both, we are trying to pick countries that have both long term and short term tailwinds.
We used median p/e, p/b, and p/s to compare valuations. Using the median instead of the average helped to make comparisons more accurate because some countries had significant number of companies with negative or unusually low earnings.
Momentum was compared by calculating an exponentially weighted rate-of-change calculation on ETFs representing each country. While this is my preferred method, comparisons using the previous 12 or 6 month returns are very similar.
Looking at the results, emerging markets appear to be a recurring theme. There also seems to be an Asian theme appearing. Four of the top five countries are emerging markets, while five of the top six are in (or partially in) Asia.
|Rank||Country||ETF||Median P/E||Momentum Rank|
Disclosure: Long EWJ