Tag Archives: EEM

Price is What We Pay, Value it What We Get

In a fun preview to our coming Newsletter, we wanted to run through a few charts and a reminder of a blunt valuation tool … So here we go!

The PE Ratio and CAPE (Cyclically Adjusted PE)

Directly from our Newsletter …

“One of the most basic valuation metrics used from a very macro level is the P/E ratio, or price to earnings ratio. This simply the price of an asset, group of assets, index or the like, divided by the earnings said asset is delivering. Most times the delivery is on a trailing annual basis, making for a nice round number.”

The CAPE ratio is just a fancy name for the 10 year average earnings, in order to smooth out the fluctuations of just one single year.

Current Valuations

Se we know our blunt valuation measure, let’s look at current levels … Higher would infer more expensive … Just FYI

S&P 500 (Favorite US Index) PE Ratio- 25 with a long term average of 14

S&p 500 P E ratio

S&P 500 CAPE Ratio – 31 with a long term average of 17

S&P Cape.png

The world is a smaller place now … Here is a world Capitalization from our friends at JPMorgan – Only 50% US?

JPMorgan MSCI global breakdown

CAPE Ratios for Big Internationals and Emerging Internationals – 15 and 13 BELOW long term average – Possibly Cheap!

9-1-17 EAFA and EEM CAPE

  • Overseas are more reasonable priced versus their long term average
  • Over half the world capital markets are overseas
  • After a long slow recovery, International counties seem to be getting on their feet

Glad we have holdings there!

Have a Great “Internationally Diversified” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.