Sometimes being told something is true simply isn’t enough.  You have to see things to truly grasp them.

You hear in markets 101 that market prices are a function of expectations of future earnings.  This has never been so clear to me until I matched up a chart of global earnings with 2 prominent global ETFs

Here’s a look at the MSCI ACWI consensus Forward EPS estimates.

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Via Jeff Kleintop

Now here’s a look at the World Index ex US over a similar time span


Here’s the Emerging Markets ETF EEM


Emerging Markets and the World-ex US both have tended to top out when earnings expectations topped out.  The EEM chart actually looks pretty similar to earnings expectations.

People want to talk about U.S. stocks trading at high CAPE levels relative to years past.  Well, based on these global market charts, we see a relatively constant multiple with a notable discount to 2008 expectations.

I’ve cherry picked evidence to make the point more clear, but it’s interesting none the less.  Imagine what’s in store for global stock prices if earnings and expectations can break out.

Trade ’em Well