We have updated our research website with the data from the 30th of April 2019. The most interesting results are summarized below.
Research in Charts
Mean Reversion: winner and loser alternate
- In the last decade, US stocks and US dominated regions had the highest performance across all markets. Conversely, US companies and US dominated regions showed the lowest returns between 1998 and 2008. Furthermore, the worst-performing region in the last 10 years also showed mean reversion tendencies in the long run: Emerging Latin America stocks stocks showed the lowest performance in 2009-2019 (+74%), but the highest among all regions in the pre-decade 1999-2009 (+200%) (Chart / SVG):
- Interesting: contrary to popular belief, the US outperformance in recent years is anything but time-stable. For example, the MSCI Europe achieved a higher value growth over almost all holding periods until the financial crisis of 2008 since its launch in 1969.
- Summery: The winners of the last 10 years often disappoint in the future due to mean reversion effects. This also applies to the sector level.
Stock Market Valuation
Based on a universe of 6,500 companies, each month, we calculate fundamental valuation ratios for several countries and regions.
- Assuming a fair CAPE of 18.3 and a fair PB of 1.8, currently approximately half of all 40 stock markets trade below this fair value.
- Ranking of regions based on CAPE:
- Eastern Europe: 9,4
- Emerging Markets: 16,1
- Asia (EM): 16,8
- Historical CAPE average: 18,3
- Europe (DM): 19,2
- America (EM): 19,5
- World: 24,0
- Developed Markets: 25,4
- USA: 30,6
- Most attractive countries based on:
|Russia (7,0)||Greece (0,7)||Russia (6,5%)|
|Turkey (8,0)||Russia (0,9)||Czech (6,3%)|
|Czech (9,9)||Korea (South) (1,0)||Finland (4,9%)|
Interactive Map: Stock Market Valuation Ratios
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 kind of long-term returns can investors expect based on fundamental valuation (real)?
- World AC: 5,4% p.a.
- United States: 2,9% p.a.
- Europe: 6,8% p.a.
- Emerging Markets: 7,6% p.a.
- Developed Countries with highest expected returns: Korea (South) (10.2%), Singapore (9,4%), Spain (8,5%)
- Developed Countries with lowest expected returns: United States (2,9%), Denmark (3,1%), Ireland (3,5%)
Details: Stock Market Expectations
Based on the Fama and French HML-factors (High Minus Low), we calculate value premiums for the most important regions.
- Longest period of losses in history: value stocks disappointed compared to growth stocks for years. This holds true for all major regions:
- Fama and French HML value premiums over the last 3 years for the most important regions:
- Global: -2,8% p.a.
- United States: -3,9% p.a.
- Europe: +1,5% p.a.
- Japan: -1.2% p.a.
Interactive: Value Cycle