Fundamental And Technical Ratings For Key Regions And Countries

Let’s take a quick summary review of fundamental and technical ratings for key regions/countries: US, Eurozone, Japan, Emerging Markets, United Kingdom, Asia Pacific ex Japan, Switzerland, China.

The regions and countries were selected for market-cap significance within a world index of stock markets.

This table shows the market-cap weight of each within the FTSE Global All Cap Index. It also presents the relative size of the earnings of the markets within that index, generated by normalizing their P/E ratios.

The U.S. is still the giant relative to the others at 52% of market-cap and 44% of world earnings from listed companies.

China is a major economy, but with respect to listed companies, it is still a minor market at 2.1% of world index market-cap.

Here are several key fundamental valuation metrics for the securities representing those regions/countries (source Morningstar):

China and the emerging markets overall have the lowest P/E ratios (9.3x sand 11.1x), while the U.S. and Switzerland have the highest (17.9x and 17.5x). Note that Switzerland has a relatively small local economy, but is home to many global multi-national companies.

The U.S and Switzerland also have the highest price to cash flow (9.6x and 10.7x) while Japan, China and emerging markets have the lowest (3.0x, 3.4x and 4.5x).  Europe is relatively more attractive by P/CF  (5.4x) than the U.S. at (9.6x)

Japan has the lowest trailing yield at 1.17% while Asia Pacific ex Japan has the highest at 5.7%.

Additional note about the U.S (S&P 500).
According to FactSet the current estimate for Q3 earnings is negative 5.5% for the S&P 500.  While there are often some upside surprises, they expect a negative quarter in any event.  Q2 was also negative, so if Q3 is negative that would be the first time there were 2 year-over-year, back-to-back quarterly declines since Q2 & Q3 of 2009.

The current estimate (according to FactSet) for Q4 earnings is negative 0.4% for the S&P 500.  If that comes to pass, that would be 3 back-to-back, year-over-year quarterly declines.

This chart is for sequential quarterly earnings, presenting a difficult period for the index.  Recent declines plus the expected Q3 and Q4 declines look uncomfortably like prior periods that saw accompanying index price declines.  Analysts are predicting earnings growth in 2016, however.

(click image to enlarge)