Asset Allocation Watch: Are equities cheap or expensive ahead of the reporting season?
Welcome to an update of our equity valuation chart book. The reporting season kicked off with a couple of the big banks on Friday and in this piece, we put the expectations into a regional and geographical context.
As per usual, loads of charts and a few words as we like it!
1) Equities are NOT…
Are equities expensive in a historical context?
Only South American and Pacific stocks look outright cheap relative to historical Fwd P/E levels entering this reporting season. Across the US, Asia and Europe stocks trade more in line with 5-10 year mean values of P/E multiples. It would be wrong to say that equities look outright expensive based on a historical P/E analysis.
Chart 1: 12m fwd P/E across geographies