## Figure 1.7. Valuations of Global Equities

## Source details

**Canonical URL:** [Figure 1.7. Valuations of Global Equities](https://www.imf.org/-/media/files/publications/gfsr/2018/april/ch1/pdf/figure1-7.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/gfsr/2018/april/ch1/pdf/figure1-7.pdf.md)
- [Structured JSON version](/-/media/files/publications/gfsr/2018/april/ch1/pdf/figure1-7.pdf.json)

---

### Overview
- In the United States, valuations are high relative to their historical averages and pre-GFC peak, and to other countries.
- However, US equity valuations appear low relative to US Treasuries.
- Equity valuations have been supported by historically low interest rates and robust earnings expectations.
- The relative equity valuations are closer to their historical averages if more sustainable earnings are assumed.
- Global equities have extended their rally in recent months, on balance, since October ...
- ... supporting a rebound in equity issuance, especially in emerging markets.

### 1. MSCI Equity Indices (End-2011 = 100)
- Time series years shown: 1990 92 94 96 98 2000 02 04 06 08 10 12 14 16 18
- Regional series referenced: EMs excluding China, United States, Europe, Other advanced, China, United States EM Asia, Japan, Euro area EM Latam EM EMEA, United Kingdom
- Indexed level anchors: 0 100 200 300 400 (visual scale points indicated)

### 2. Gross Equity Issuance (Billions of US dollars, quarterly)
- Time series years shown: 2005 07 09 11 13 15 17
- Visual scale points indicated: 0 50 100 150 200 250 300
- Noted pattern: rebound in equity issuance, especially in emerging markets

### 3. Valuation Metrics (Dotted arrows: 2008–12; solid arrows: 2012–18; squares: long-term average)
- Price-to-earnings ratio and Price-to-book ratio are depicted.
- Time series years shown: 2013 14 15 16 17 18
- Long-term average indicated with squares.
- Visual scale points indicated: –10 0 10 20 30 40 50 60 70 80

### 4. Valuation Metrics (Z-scores)
- Z-score scale shown: 3 2 1 0 –1 –2 –3 (visual)
- PE (left scale) and CAPE (left scale) plotted.
- ERP (right scale, inverted) plotted.
- Years with data points: 1990 92 94 96 98 2000 02 04 06 08 10 12 14 16 18
- Numeric axis fragment included: 0.5 1.0 2.0 2.5 1.5 3.0 3.5 (visual)

### 5. Decomposition of Equity Market Performance (Percent contributions to cumulative returns)
- Components listed: Equity risk premiums, Earnings (current and projected), Risk-free rate, Price return
- Supporting forecasts and comparisons: IBES EPS growth forecast; Long-term average of EPS growth; WEO nominal GDP growth forecast
- Alternative IBES scenarios with term premium adjustments: IBES with term premium + 50 bps; IBES with term premium + 150 bps

### 6. Equity Risk Premium under Different Assumptions (Z-scores; inverted scale)
- Regional labels shown: Emerging markets, United States, Japan, China, Europe
- Z-score axis range shown visually: –3 –2 –1 0 1 2 3 (inverted)
- Interpretation: Equity risk premiums vary under different earnings and term-premium assumptions (visual comparisons across regions)

*Sources: Bloomberg Finance L.P.; Citigroup Index LLC; ICE Bank of America Merrill Lynch; JPMorgan Chase & Co; IMF, World Economic Outlook (WEO) database; Morgan Stanley Capital International (MSCI); Standard & Poor’s; Thomson Reuters IBES; and IMF staff calculations.*

---


_Source: https://www.imf.org/-/media/files/publications/gfsr/2018/april/ch1/pdf/figure1-7.pdf_