The extremes.
CHEAPEST FIVE · DEAREST FIVEWhat today’s valuations imply
A CAPE ratio on its own is a fact about price. The useful question is what it implies for the next decade, which depends on where the multiple sits relative to its own history, what earnings are expected to do, and what the market pays out along the way. Running each market through those three inputs over a 10-year horizon gives the figures below.
The spread is the point. US Large sits at the 99th percentile of its own history and implies 2.72% a year after inflation. Hong Kong implies 8.59%. That gap is larger than most people’s entire expected return, and it comes from starting valuation alone.
| Market | CAPE | Percentile | Real | Nominal |
|---|---|---|---|---|
| Hong Kong | 16.3 | 42% | 8.59% | 11.62% |
| China | 13.7 | 38% | 7.80% | 10.80% |
| US Small | 18.8 | 28% | 6.89% | 9.87% |
| United Kingdom | 17.9 | 80% | 6.87% | 9.85% |
| Europe ex UK* | 22.6 | 77% | 6.81% | 9.78% |
| Dev ex US Large* | 22.3 | 61% | 6.54% | 9.51% |
| Emerging Markets | 22.9 | 91% | 5.63% | 8.58% |
| Japan | 28.3 | 48% | 5.60% | 8.54% |
| Asia ex Japan | 25.0 | 94% | 5.03% | 7.95% |
| All Country | 31.7 | 91% | 3.97% | 6.87% |
| US Large | 40.4 | 99% | 2.72% | 5.58% |
Annualized over 10 years. Real returns are after inflation; nominal adds US expected inflation so the figures sit on the same footing as the optimizer. Percentile is where each market’s CAPE falls within its own history rather than against other markets, so a high number means expensive for that market specifically. Starting valuation has historically explained roughly half the variation in ten-year returns, which leaves the other half to everything else. These are expectations over a decade, not a forecast for any single year, and a market can stay expensive for a very long time. Rows marked * use the closest available index rather than an exact match.
Build a portfolio on these numbers
These are not illustrations. They are the equity assumptions the optimizer starts from, so a portfolio built in it is allocating to what markets are priced to return from here rather than to whatever happened to win over the past decade. The map and this table are free to read; a free account is what lets you put them to work across all 42 asset classes.