The world is a big place, but there’s a fair amount of uniformity when it comes to equity returns in 2006. Bull markets are everywhere. They vary in degree, of course. But from a regional perspective, at least, black ink ruled this year through October 31.
Fundamental valuation is another matter. There’s a bit more disparity when it comes to the usual array of valuation metrics. Let’s dive in and take a look, using data supplied by S&P/Citigroup Global Equity Indices through October 31, 2006.
Starting with total returns, European Emerging markets continue to lead the pack with a 36% total return (this and all returns quoted are dollar based). Even the worst performing region–Mid-East and Africa–is up 5.8%. A bullish tailwind, in other words, can be found in almost every corner of the globe’s stock markets, and so investors have had to work hard to lose money this year. Indeed, the World index has climbed 16.3% through last month. Meanwhile, U.S. stocks–although near the bottom of horse race in 2006 on a global basis–have advanced 12.3%, which is above-average on an historical basis.
The global equity profile becomes more complicated once we start looking at valuation. Latin America is the least expensive on a trailing 12-month price-earnings ratio basis. Trading at slightly above 12-times earnings, Latin America offers the best investor-friendly pricing by this measure when compared to everything else. U.S. stocks represent the highest-priced market by this definition in our survey, trading at nearly 18 times earnings.
