Wall Street officially ranks among the world’s most expensive markets on a number of metrics. In fact, two-third of money managers finds the U.S. stock market’s recent record run unsettling. The dizzying ascent of U.S. stocks as a result of lofty valuations might sooner than later threaten to spark a major sell-off.
In such an overvalued market, it will be enticing to find stocks that are perceived to be “bargains†or are undervalued. These stocks are fundamentally sound to withstand any market upheaval and at same time will help investors make money by buying before the impending rally.
Wall Street Ranks Among the Globe’s Most Expensive
Investors continue to fret over lofty valuations on Wall Street. The U.S. stock market has turned out to be the least reasonably priced equity market across the globe, coming in last among the 40 countries and regions surveyed on a variety of metrics by StarCapital Research. But, an undervalued equity market has achieved better returns in the future compared to their overvalued foils. The following table shows how much the U.S. stock market is overvalued compared to other markets around the world:
| OVERALL RANK (TOP 5 & BOTTOM 5 CONSIDERED) | COUNTRY | CAPE | P/E |
| 1 | South Korea | 15.3 | 12.9 |
| 2 | Austria | 17.2 | 16.6 |
| 3 | Czech Republic | 8.8 | 12.9 |
| 4 | Hungary | 13.6 | 10.4 |
| 5 | Italy | 14.6 | 38.8 |
| 36 | Indonesia | 19.7 | 21.1 |
| 37 | India | 20.6 | 22.8 |
| 38 | Philippines | 22 | 20.6 |
| 39 | Belgium | 22.9 | 27.6 |
| 40 | U.S. | 28 | 22.4 |
Source: StarCapital Research
The U.S. stock market’s cyclically-adjusted price-to-earnings (CAPE) ratio, which compares decade-long stock prices with corporate earnings, is 28. This is the third highest among the countries compared, cheaper only to Denmark (36.1) and Ireland (34.5). Historically, the CAPE ratio at current levels in the U.S. has preceded significant market declines.
