Vanguard Says Non-U.S. Equities Have More Attraction Than U.S. Equities
The illustration makes the extent of the overvaluation clear. The solid blue line representing U.S. equities' cyclically adjusted price/earnings ratio leaps from its fair-value range, represented by the gray band, just as it did for an extended period before the dot-com bubble burst.
![Vanguard Says Non-U.S. Equities Have More Attraction Than U.S. Equities](https://ussnsimg.moomoo.com/5482174687888287438.jpg/bigmoo)
One of the key take aways from their economic and market outlook shouldn't be a surprise. They've said for a few years that U.S. equity valuations were approaching "stretched" territory. A strong 2021 run-up in prices driven more by valuation expansion than by increased profits makes U.S. equities more overvalued than at any other time since the dot-com bubble.
Vanguard's assessment is based on the latest quarterly running of the Vanguard Capital Markets Model (VCMM), as of September 30, 2021. The model considers equity valuations relative to their fair value, conditional on interest rates and inflation. Rising interest rates erode the present value of future cash flows, so interest rates and inflation tend to influence equity market valuations—and, by extension, prices.
Vanguard 2022 outlook calls not for a lost decade for U.S. stocks, as some fear, but for a lower-return one.
Specifically, they are projecting the lowest 10-year annualized return projections for global equities since the early 2000s. We expect the lowest ones in the U.S. (2.3%–4.3% per year), with more attractive expected returns for non-U.S. developed markets (5.3%–7.3%) and, to a lesser degree, emerging markets (4.2%–6.2%). The outlook for the global equity risk premium is still positive but lower than last year's, with total returns expected in the range of 2 to 4 percentage points over bond returns.
For U.S. investors, this modest return outlook belies opportunities for those investing broadly outside their home market.
Recent outperformance has only strengthened our conviction innon-U.S. equities, which have more attractive valuations than U.S. equities. Although emerging-market equities are above our estimate of fair value, we still expect higher returns than the U.S. and diversification benefits for investors.
Within U.S. markets,theythink value stocks are still more attractive than growth stocks, despite value's outperformance over the last 12 months.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
Read more
Comment
Sign in to post a comment
Mittchell : I agree that
ACIC是骗子 : I bought a non-US ETF
Molly wealth talk OP ACIC是骗子 : Cool
Can you talk about what region
ACIC是骗子 Molly wealth talk OP : $ACWI Ex-US Index MSCI Ishares (ACWX.US)$
CFsmart : Hood