Daily Spotlight

U.S. Stocks at Premium

As global markets have gyrated due to the spread of COVID-19 and the onset of a global recession, one thing has not changed. U.S. stocks are more expensive than global stocks on numerous valuation metrics. The P/E ratio on the S&P 500 is 22.7x, above the global average of 17x and well above the 14x average or Emerging Markets. A review of price/sales ratios tells a similar story. The U.S. ratio is 2.1x, far higher than the global average of 1.2x, while Japan and Europe appear to be values at 1.1x or below. The current dividend yield for the S&P 500 is 1.9%, versus the global average of 2.3% and Europe's yields of 2.4%. One reason investors pay a higher price for North American securities is the transparency of the U.S. financial system. What is more, global returns can be volatile across individual countries, given currency, security and political risks; indeed, U.S. stocks outperformed EAFE in 2019 -- and have over the past five years. Still, we recommend that growth investors have approximately 15%-20% of their equity allocations in international stocks to take advantage of the value, and we have been adding global stocks to our Universe of Coverage. ...  or below. The current dividend yield for the S&P 500 is 1.9%, versus the global average of 2.3% and Europe's yields of 2.4%. One reason investors pay a higher price for North American securities is the transparency of the U.S. financial system. What is more, global returns can be volatile across individual countries, given currency, security and political risks; indeed, U.S. stocks outperformed EAFE in 2019 -- and have over the past five years. Still, we recommend that growth investors have approximately 15%-20% of their equity allocations in international stocks to take advantage of the value, and we have been adding global stocks to our Universe of Coverage.   more

Market Podcast

Analyst
Quick Notes

Weekly Economic Commentary