Global P/E Ratios: How the U.S. Stacks Up

As shown in the table and charts below, the trailing and forward P/E ratios of the S&P 500 and Nasdaq are high compared to the valuations of other markets in other countries. While it has historically had high valuations, the Nasdaq's current trailing and forward P/E ranks highest among 12 other country indices, including China's Shanghai Composite.

The S&P 500's trailing 12-month P/E ranks 3rd, although it is in the middle of the pack when looking at forward estimates. The lowest P/Es are currently in Europe. Valuations in the U.S. are higher because earnings haven't slowed as much in foreign markets and price declines in the U.S. have been less extreme, even though we're the root cause of the global market selloff.

Comments

[BonVivant]

What about the BSE (Bombay Stock Exchange)? I am curious as to how India stacks up among the major global indices? Thanks.

[chrism1962]

Thank you for this comparison, it is always useful to gauge different markets for relevant value. I still believe that the FTSE is about 10%- 12% over-valued, and if the ratios level out during the downturn the S&P may be 30% over-valued.

However, as the falling dollar is boosting exports from the US, to the detriment of the rest of the world (which isn't pegged to the USD) I feel that a 15%- 20% adjustment is more realistic.

I'm very bullish on US Financials, Real Estate, and Retail, as I do not believe that they have bottomed out yet. But I think that Technology and Industrials may perform relatively well, depending on how much of their product is exported.

[chrism1962]

Thank you for this comparison, it is always useful to gauge different markets for relevant value. I still believe that the FTSE is about 10%- 12% over-valued, and if the ratios level out during the downturn the S&P may be 30% over-valued.

However, as the falling dollar is boosting exports from the US, to the detriment of the rest of the world (which isn't pegged to the USD) I feel that a 15%- 20% adjustment is more realistic.

I'm very bearish on US Financials, Real Estate, and Retail, as I do not believe that they have bottomed out yet. But I think that Technology and Industrials may perform relatively well, depending on how much of their product is exported.

Apologies for the typo!!!

[Asif]

Using the following Business Standard article that was written when the BSE Sensex was around 14,800 on March 18th and applying the current 15,343 level to the P/E mentioned in the article, I came up with an approximate trailing P/E of 19.89.

www.business-standard....

Assuming earnings growth in 2008 comes in at the low end of the 15 to 20% range expected, the forward P/E is approximately 17.30.

[Shimmysays]

The comparisons between trailing and estimated PE ratios imply over-aggressive current year earnings growth expectations for the S&P 500. These are likely to be moderated over time, suggesting that the real valuation is somewhat higher than it appears in the chart.

[hollowman]

Why is it whenever there is an article on the P/E of the markets there is always one piece left out - interest rates.

The comparisons are meaningless if you cannot compare them to the riskless investments, which are the government treasuries.

[User 143167]

hollowman, so I guess you mean Nikkei 225 should have the highest PEs among all countries all the time as it gets the lowest interest rate in Japan?
All this monetary policy with cheap money is the root cause for all these troubles, get rid of those financial opiums, otherwise, we move from one bubble to another and finally end up losing the next decade like Japan did.

[hollowman]

User, all things being equal; yes, they should be. I think that the reason they are lower is because the Yen was used to invest in higher yielding investments elsewhere (NZ, Aus, ect.).

I do agree that cheap money has been a big problem. In fact, it's not just cheap, it's free because the interest rate is below inflation. I only hope the Fed reverses course once the CC is under control.

[nitroae23]

S&P current year P/E is a joke!They'll be lucky to make $65 this year,which puts us at 20.75,with inflation going up,up and away,thats coming down to the low teens,implications for the market are obvious.

[MikePas]

If you are a value investor go with the ratios for your investment choices.If you are a growth investor invest not in ETF and mutual funds but specific stocks. The ratios are only estimates, if another bad news from banks comes through it will be a disaster for the ratios

[gordon]

The author mentions "forward p/e" in the first line, then "current & trailing", then "FORWARD" is assumed to be current on the charts? TERRIBLE writing, becoming more common on this site. Are you assuming Wall St. estimates of earnings growth (other than financials) going forward? No way. That puts the FORWARD p/e well over 20, maybe as high as 25 on the S&P.

[twinturbo11]

I have ALWAYS ALWAYS ALWAYS wondered where on the WWW can we find foward and trailing P/Es of all (or most) of the exchanges of the world. I am looking for something reliable, accurate, dynamic (ie updates daily), and from a good source. I have googled this over and over, and can never find it.... Anyone has any ideas????????

[User 136503]

Answer for Twinturbo11: Regarding where one finds Global P/E ratios, it is very difficult to go to each individual index to locate the respective P/E ratios. If you noticed at the heading of this article, the author identified the ticker symbols for the country ETF funds that are produced by Barclay's Ishares. If you go to the Ishares Web site at ishares.com, you can look up the individual country ETF funds and locate the P/E ratios for that fund. This is probably an easier way to obtain this information. For example, the ticker EWG is identified above, which is the Ishares ETF fund for the German market. Glancing at that detailed page, you will find the P/E ratio. Below is a link to that fund. Thus on one site, you can find the closest thing to obtaining all the major country P/E ratios. Hope this helps.

www.ishares.com/produc...

George

[Asif]

Thanks George. This was something I was looking for as well.

[twinturbo11]

Thanks George - however are the P/Es of country ETFs accurate? What if an ETF is trading at a premium/discount on its underlying assets?? It seems like country/market P/Es get quoted quite often, I dont seem to ever get an accurate source...

[twinturbo11]

The ishares.com website seems to be listing trailing P/Es only - where can i find forward P/Es? Also, for some reason , Yahoo seems to be quoting different P/Es for the same ETFs....

[JamesBiringer]

Good job Bespoke, as usual. Also, George, excellent comment. I wondered the same thing. As far as discrepancies between different data sources, if they're pretty close, the discrepancy would be irrelevant, imho.

Jimmy

[jstratt]

Excellent post as it summarizes the value level across markets.

It is time to be a cautious bull utilizing ETFs to limit risk. We never know where the bottom is exactly but we know that the overall risk is reduced from where it was 3 or 6 months ago.

At a time like this it is uncomfortable to invest in riskier opportunities. However forcing yourself to be in market areas that you want longer term is going to provide greater returns. As an example a 25% position taken now in QQQ with another 25% of desired investment on a pull back and again and again will generate a great return over the longer term.

If you dont feel free to get bullish after prices are much higher.

[Prosbus]

Another useful site is The Economist's free listing of their projections of annual GDP growth for about 80 countries: <www.economist.com/coun...; Click on the country and then the Forecast.

[Lynn]

Twinturbo, Standard & Poors lists forward and trailing PEs on their website. The link is:
GlobalIndices.Standard...
then click on INDEX RETURNS
then FUNDAMENTALS

[The Level 2Trader]

Hollowman was right. Interest rates play an utmost important to quantify the return. I think by adding inflation rate, it will be a better table too.

[twinturbo11]

Lynn - that is an awesome site - thank you SO MUCH :)

[CAPTGWK]

Where's this data coming from?? The PE for the S&P 500 was about 17.2 earlier this week and 17.66 at today's close. (Source: markets.usatoday.com/c...) That's not like either of your PE #s of 20.7 or 14.3. So where did your numbers come from, and why are they so differenc than the feed used by USA Today?