Stock Market Valuation
Based on a universe of 6,500 companies, each month, we calculate fundamental valuation ratios for several countries and regions.
Stock Market Expectations
We calculate the returns equity investors can expect over the next 10-15 years in several regions. The forecasts are based on the current CAPE and PB.
- What returns can investors expect based on fundamental valuations over long-term periods of over 10 years (in real terms):
- World AC: 5.4% p.a.
- Europe: 6.7% p.a.
- United States: 2.7% p.a.
- Emerging Markets: 7.7% p.a.
- Developed Countries with highest expected returns: Korea (South) (10.5%), Singapore (10.0%), Austria (9.0%)
- Developed Countries with lowest expected returns: Denmark (2.5%), United States (2.7%), Ireland (3.4%)
- The forecasts are based on historical CAPE and PB observations of approximately 140 years, whereby the returns in the past were widely spread around the illustrated means. The extent of this fluctuation and the uncertainty associated with the predictions can be seen in the following chart using the Shiller CAPE as an example:
- This demonstrates that in 140 years of stock market history, attractive valuations such as those currently seen in Korea or Russia have never resulted in losses and usually generated significant above-average returns over the following 10-15 years.
- In contrast, high valuations, such as those in the USA, were only followed by returns exceeding 5% in very few outlier periods; typically, significantly lower or negative returns were realized in the long-run.
- In the last edition of our research update, we discussed which stock market returns at what probabilities can be expected in the next 15 years, using scenario analyses for the DAX 30 and S&P 500.
Details: Stock Market Expectations