2/7/19: Earnings and Market Valuations: Equity PEs

While P/E ratios are gamable and informationally highly restrictive, the metric is still a useful one when considering as to how expensive/cheap equity can be. Here is the latest chart via @topdowncharts showing P/E ratios based on 10 year average earnings (smoother series, but the long average is even less informationally rich than pure P/Es):

Which makes:

1. U.S. markets overvalued in excess of 2006-2007 peaks, but less than in the blowout bubble of the dot.com era;
2. Developed markets (ex-US) and Emerging markets relatively moderately priced.

Given the fact that U.S. equities earnings are probably the most susceptible to strategic manipulation, e,.g. shares buybacks, M&As and earnings/cash management, the U.S. markets are in heading for trouble.