Aug 2025

World share market pricing- Part 5: Growth in Profits & Dividends – Why USA leads & Australia lags

Today’s article looks at running rates for growth in earnings and dividends in each market as a context for assessing over-pricing on traditional metrics like P/Es, div yields, and price/book ratios.   The stand-outs are Sweden (Spotify), Netherlands (ASML), Japan (macro & micro reforms), and the US (strong earnings & dividend growth engine). The Aussie share market has done poorly on earnings and dividend growth, not just relative to other countries, but in absolute terms.  Why? Two words – Banks. Miners. Both sectors peaked a decade ago. Earnings and dividends per share have not even kept pace with inflation. Share prices have risen well head of earnings and dividends. The US market may appear very expensive on some metrics, but this is mostly underpinned by much stronger earnings & dividends.

World share market pricing- Part 4: Profit Margins & Returns on Equity– US highest, but sustainable?

This instalment delves deeper into pricing and valuations for the 20 largest share markets in the world. It goes behind initial pricing metrics like p/e ratios, dividend yields, and price-to-book ratios, to look at underlying corporate profitability. The US market appears on the surface to be more expensive than other countries (higher p/e, lower div. yields, higher price/book, etc), but US companies are the most profitable in the world, which justifies higher pricing. However, US company profitability is currently running at very high – and probably unsustainable - levels, similar to the 1990s ‘dot-com’ boom which collapsed in the ‘tech-wreck’ crash & US/global recession. Company profitability has been much lower in Australia than in the US for many decades (aside from one brief period). Why?

World share market pricing- Part 3: Forward P/E ratios & earnings growth assumptions

Not only do global share markets appear expensive relative to reported profits, dividends, and book values (Parts 1&2), the ‘forward’ price/earnings ratios are even higher, as they assume outlandishly high profit growth for the coming year. This is a double-layer of over-pricing – ambitious pricing of current profits, plus ambitious assumptions of future profit growth. It is not just the US – in fact, US profit outlooks are probably more achievable than most other countries, including Australia, where pricing is off with the pixies! I also take a look at the positive and negative forces driving global profits. The media always focus on the negatives, but actually there are quite a few positives. What are the risks and were are the cracks likely to appear?

World share market pricing- Part 2: P/E ratios, Dividend Yields, Price/Book – all appear very high!

Most share markets – including US and Australia in particular - appear to be very expensive on three widely-used pricing metrics – price/earnings ratios, dividend yields, and price-to-book value ratios. Each indicates high pricing relative to historical averages, and also relative to underlying fundamentals like profitability and sustainable growth rates. The US in particular stands out as being expensive on these measures, even after allowing for its stronger fundamentals relative to other markets. Given the Australian market’s much weaker underlying fundamentals, Australia is probably even more over-priced than the US at current levels. These simple pricing indicators are not a bad starting point, but they gloss over a host of differences in each market, like returns on equity, dividend pay-out ratios, earnings grow

Share Market Pricing per Country – how does your country rate?

Here’s an update on share market pricing around the world, based on the two most widely used measures -  price/earnings ratios and dividend yields. USA and India are way out in 'expensive' territory. Are these justified? Australia appears less expensive – but still over-priced given its market structure and sector mix. At the 'cheap' end are Italy, Brazil, Hong Kong, and Saudi Arabia – does ‘cheap’ mean ‘good value’? Is global share market over-pricing a problem? Is a crash imminent? Why have I remained reasonably bullish on global/US shares despite increasingly expensive pricing?

July 2025 snapshot: Share markets up for 4th month, inflation easing, more rate cuts soon

Another month of good gains on global share markets across almost all industry sectors and countries, despite Trump’s frenzy of deals, adjustments, backflips, side-deals. Inflation continues to ease, but central banks remain cautious and reluctant to cut rates further for now. But bond yields rose at the long end, reflecting fears of higher inflation ahead. Global growth, spending, and employment all remain reasonably strong – defying wide-spread predictions of slowdowns & recessions. On commodities markets, oil and gold kept rising on inflation and Middle East troubles. Iron ore was finally boosted by much-awaited Chinese stimulus.