The Cheapest and Most Expensive Stock Markets in 2026

What Is CAPE and Why Does It Matter?

The CAPE ratio (Cyclically Adjusted Price-to-Earnings), popularised by Nobel laureate Robert Shiller, divides the current price of a stock market by its average inflation-adjusted earnings over the past 10 years. By smoothing out the business cycle, CAPE gives a clearer picture of whether a market is cheap or expensive relative to its long-run earning power.

A high CAPE doesn't mean a market will crash tomorrow. But decades of academic research show that starting CAPE is the single best predictor of subsequent 10-year returns. Markets bought at low CAPEs have historically delivered significantly higher returns than markets bought at high CAPEs.

The 10 Cheapest Markets Right Now

These markets are trading in the bottom third of their own historical range. “Cheap” means the current CAPE is at or below the 33rd percentile of all observations since each market's inception.

The cheapest markets are overwhelmingly emerging. Indonesia stands out: its current CAPE of 9.3 is essentially the cheapest reading in its entire history since 2001 — below the 1st percentile — and less than half its median of 18.8. The Philippines at 12.8 sits well under its median of 20.8.

Turkey deserves special mention. Its CAPE of 7.5 is the lowest absolute number in our dataset, but its percentile (19%) is higher than Indonesia's or the Philippines' because Turkey has always been cheap — its median CAPE is just 10.5. Being cheap relative to an already-cheap baseline is less compelling than being cheap relative to a normally-expensive baseline.

Rounding out the top 10 cheapest:

Denmark is the only developed market in the cheapest 10. Its CAPE of 20.6 looks unremarkable in absolute terms, but it's cheap for a market whose median is 26.5. Context is everything — and the same context cuts the other way for US small caps, which sit almost exactly at their historical midpoint (50th percentile) even as US large caps trade near record valuations.

The 10 Most Expensive Markets

These markets are trading in the top third of their own historical range — the 67th percentile or above. Some are at all-time highs.

Taiwan and South Korea are both literally at their all-time maximum CAPE — the 100th percentile. Taiwan's 51.6 is two and a half times its historical median of 20.6, and Korea's 44.2 is three times its median of 14.2. The AI semiconductor boom, running through TSMC, Samsung, and SK Hynix, has repriced both markets to levels neither has ever seen.

The US at the 99th percentile is no surprise. With a CAPE of 41.5 against a 145-year median of 16.6, the S&P 500 has only been more expensive at the dot-com bubble peak. The current CAPE exceeds the 95th percentile of its own history (33.1) by a wide margin.

The rest of the most expensive:

India at the 81st percentile and a CAPE of 32.1 deserves attention. India has always traded at a premium (median 22.8), reflecting fast GDP growth and strong corporate earnings. But even by Indian standards, this is stretched. Canada, at the 81st percentile of its own history, rounds out a top ten dominated by the AI trade and commodity-linked developed markets.

The Fair-Value Middle Ground

Several major markets sit near the middle of their historical range — neither obviously cheap nor expensive. These are the “fair value” markets, trading between the 34th and 66th percentile.

Japan at the 48th percentile is notable. Despite the Nikkei's strong run, Japanese equities are still below their historical median CAPE of 30.4 — a legacy of the 1980s bubble when CAPE exceeded 90. Japan has the longest history of any market to “grow into” a reasonable valuation.

China at the 36th percentile is cheaper than many investors assume — it now sits at the edge of the cheapest ten. After the sharp derating of 2021-2023, Chinese equities have partially recovered but remain well below their 2007 and 2015 extremes.

Do Cheap Markets Actually Outperform?

The short answer: yes, over long horizons, with significant noise along the way.

The academic evidence on CAPE as a predictor is extensive. Here are the key findings:

The Research Affiliates evidence

Research Affiliates (the source of our CAPE data) has published extensively on this topic — and they're one of 16 firms whose forward-looking return estimates we compare in detail. Their work shows that across developed and emerging markets, the starting CAPE percentile explains roughly 40-60% of the variance in subsequent 10-year real returns. Markets bought in the bottom quintile of CAPE have delivered median real returns of 10-12% per year over the following decade. Markets bought in the top quintile have delivered 0-3%.

The Shiller evidence

Robert Shiller's original work on the US market (1881-present) showed that CAPE explains about 40% of subsequent 10-year real returns. When US CAPE was in the bottom quartile, the average 10-year real return was approximately 10% per year. When in the top quartile, approximately 3%.

The cross-country evidence

A 2016 study by Klement (published in the Journal of Portfolio Management) examined CAPE across 40+ countries and found that a portfolio buying the cheapest-quintile markets and selling the most expensive outperformed by approximately 6% per year over a 30-year sample.

Hit rates by percentile

Based on the combined academic literature, here are approximate historical hit rates for whether buying at a given CAPE percentile leads to above-median returns over the following 10 years:

The hit rate at extremes is striking. Markets bought in the cheapest quintile delivered above-median returns roughly 80% of the time over the following decade. Markets bought in the most expensive quintile did so only about 20% of the time.

What This Means for Your Portfolio in 2026

The US concentration problem

If you hold a global equity index fund, you probably have 60-65% in the US. That means the majority of your equity portfolio is in a market trading at the 99th percentile of its 145-year history. This isn't a timing call — it's a statement about expected returns. The base rate for 10-year real returns starting from this CAPE level is 0-3% per year.

The emerging market opportunity

Nine of the ten cheapest markets are emerging, spread across Asia (Indonesia, Philippines, Malaysia, China), Latin America (Brazil, Chile, Colombia, Mexico), and Turkey. These markets have CAPEs well below their historical medians. The base rate for 10-year returns from these starting valuations is significantly more attractive.

The challenge is that cheap EM markets are cheap for reasons: political risk, currency volatility, governance concerns, and lower liquidity. CAPE doesn't account for these risks. The academic evidence says cheap markets outperform on average, but individual cheap markets can stay cheap forever.

Japan: the contrarian case

Japan is the most interesting developed market right now. At the 48th percentile, it's below fair value despite a major rally. Corporate governance reforms (the “Japan Inc.” revolution), share buybacks, and yen weakness have driven a structural improvement in Japanese corporate profitability. If this continues, the CAPE has room to expand even from here.

The value of diversification

The biggest takeaway isn't about picking the cheapest market and going all-in. It's about understanding where your portfolio sits on the valuation spectrum — and what's actually driving your returns. (Our factor exposure analysis shows how adding international equity introduces a statistically significant value tilt that US-only portfolios lack.) If 60% of your equity is in the US at the 99th percentile, you're making a concentrated bet that the most expensive market in the world (relative to its own history) will continue to defy 145 years of mean reversion.

The Full Ranking: All 43 Markets

Here is every country in our dataset, ranked by CAPE percentile from cheapest to most expensive. Explore the full data with filtering, sorting, and detail views in our interactive CAPE map.

Methodology

All CAPE data is from Research Affiliates' Asset Allocation Interactive dataset, as of June 30, 2026. The dataset covers 50 markets (43 individual countries plus multi-country composites). We rank only individual country markets, and the tables on this page are generated directly from the latest dataset each time the site is published. Percentiles are calculated relative to each market's own history since inception, which varies from 1880 (US) to 2012 (Developed Markets Small). “Cheap” is defined as the 0-33rd percentile, “Fair” as 34-66th, and “Expensive” as 67-100th. Historical hit rates are approximate figures drawn from the published research of Shiller, Research Affiliates, and Klement (2016).