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 13.4 is near the bottom of its range since 2001, well below its median of 18.9. The Philippines at 14.8 sits far below its median of 21.1.

Turkey deserves special mention. Its CAPE of 8.7 is the lowest absolute number in our dataset, but its percentile (30.5%) 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 23.9 looks high in absolute terms, but it's below the 40th percentile because Danish equities have historically traded at rich valuations (median 26.6). Context is everything.

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 is literally at its all-time maximum CAPE — 100th percentile. Driven overwhelmingly by TSMC and the AI semiconductor boom, its CAPE of 37.3 is nearly double its historical median of 20.5.

The US at the 98.7th percentile is no surprise. With a CAPE of 40.0 against a 145-year median of 16.6, the S&P 500 has only been more expensive during the dot-com bubble peak. The current CAPE exceeds the 95th percentile (32.6) by a wide margin.

The rest of the most expensive:

India at the 87.5th percentile and a CAPE of 34.8 deserves attention. India has always traded at a premium (median 22.7), reflecting fast GDP growth and strong corporate earnings. But even by Indian standards, this is stretched.

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 43.9th percentile is notable. Despite the Nikkei's strong run, Japanese equities are still below their historical median CAPE of 30.7 — 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 58.4th percentile is closer to fair value than many investors assume. 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. 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 98.7th 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

Six of the ten cheapest markets are in emerging Asia (Indonesia, Philippines, Malaysia, Thailand) and Latin America (Brazil, Chile, Mexico, Colombia). 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 43.9th 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. 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 42 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 January 31, 2026. The dataset covers 50 markets (42 individual countries plus 8 multi-country composites). We rank only individual country markets. 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).