In the chart below we highlight the returns of each country's major index since March 12, 2003 (the start of the current bull market of the MSCI World Market Index). We compared these returns to the current P/E ratio (blue dots) of each index along with the change in the P/E ratio (black lines) since March 12, 2003.
Interestingly, South Africa and Russia, two of the countries with the best returns, still have the lowest P/E ratios. Japan and Sweden have seen the largest declines in their ratios although the Nikkei's still remains the highest of the group.
In the past we have highlighted that P/E ratios have actually compressed in the US during this bull market, but this holds true globally as well. Only four of the seventeen indices have seen an expansion in their P/E ratios since the start of the global bull market, and those increases were minimal, indicating that earnings growth has far exceeded price rises, even as prices have soared.
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