Summary
As worldwide markets are challenged by trade wars, higher interest rates, conflict in the Middle East, and the battle between Russia and Ukraine, one thing has not changed. U.S. stocks are more expensive than global stocks. And with the run-up in stock prices in 2023 and 2024, U.S. stocks became even more expensive. Consider P/E ratios. The trailing P/E ratio on the S&P 500 is 22.5, above the global average of 15 and well above the 10-14 average P/Es for emerging market stocks in China and Latin America. A review of yields tells a similar story. The current dividend yield for the S&P 500 is 1.3%, versus the global average of 2.8%, and European, Australian and Latin American yields of 3%-6%. Taking a step back, investors generally are willing to pay a higher price for North American securities because of the transparency of the U.S. financial system as well as the liquidity of U.S. markets. What’s more, global returns can be volatile across individual countries, given currency, security, political, and geopolitical risks. Indeed, U.S. stocks (ETF SPY) have outperformed EAFE shares (ETF EFA) over the past year as well as over the past five years. The tide is turning a bit in 2025, as global investors respond
