Here's a quick scan across countries and regions to find the top (and bottom) PE10. The PE10 is a stock market valuation metric which compares the price to the average earnings of the past 10 years. The reason to look at average earnings is that it smooths out the peaks and troughs that result from business cycles. It's also useful for analyzing countries that typically see greater volatility of earnings e.g. where the index is particularly concentrated. Overall the key point is that it gives a less noisy signal, and from an investing standpoint the biggest challenge is to make the distinction between signal and noise.

The table below shows a diverse group of countries at the top and the bottom of the rankings. The next chart shows the progression of the indicator across time for US (one of the top ranked... i.e. most expensive markets) compared to emerging markets and developed markets. It presents a compelling picture, with the key point being from a valuation perspective diversification outside of US stocks probably makes sense. While valuation is still only one piece of the puzzle, e.g. you still need to look at profitability, it provides important context and a key guide to longer term returns.  After all, there's really two key variables in investment performance: the price at which you sell and the price you paid.

It's quite a diverse group on both ends of the scale. The top 10 include the more growthier yet fully priced emerging markets, while the bottom 10 include the cheaper countries, yet with arguably structurally lower earnings e.g. in the case of Greece. It should come as no surprise that USA is near the top.

Putting the US PE10 in historical context, and comparing against Emerging Market Equities and Developed Markets (excluding US), there's a clear valuation case for diversification outside of US equities.