If you are a boglehead/indexer/EMH-believer (like WCI, PoF, and most forum participants), then you should allocate less than 50% to US stocks because the US holds less than 50% of the global market cap.
If you are a value investor (like me), then you should hold much less than 50% in US stocks because:
"Using Shiller’s cyclically adjusted P/E (CAPE) ratio, one of many valuation measures, Exhibit 3 illustrates both the expensiveness of US stocks and the relative attractiveness of developed and emerging equities. A yawning gap has opened up in the relative multiples for these various geographic exposures. Today’s CAPE of 29x for US equities does not look too stretched in this exhibit. The second chart below, however, puts the expensiveness of the US markets into broader perspective. The market is trading in the most expensive ventile in history! The only other times US equities have been this expensive on this measure include 1929, the peak of the Internet bubble, and in 2008, just before the GFC. For those inclined to dismiss CAPE, other valuation metrics such as the Price/Sales ratio have soared to dizzying heights as well."
This excerpt (above) is from a GMO-authored article on Morningstar: http://news.morningstar.com/articlenet/SubmissionsArticle.aspx?submissionid=224474.xml.
The US has now out-performed for a long stretch, but this is unlikely to be a permanent condition. (See handy graph of historical relative performance in the article above.)
If you are a value investor (like me), then you should hold much less than 50% in US stocks because:
"Using Shiller’s cyclically adjusted P/E (CAPE) ratio, one of many valuation measures, Exhibit 3 illustrates both the expensiveness of US stocks and the relative attractiveness of developed and emerging equities. A yawning gap has opened up in the relative multiples for these various geographic exposures. Today’s CAPE of 29x for US equities does not look too stretched in this exhibit. The second chart below, however, puts the expensiveness of the US markets into broader perspective. The market is trading in the most expensive ventile in history! The only other times US equities have been this expensive on this measure include 1929, the peak of the Internet bubble, and in 2008, just before the GFC. For those inclined to dismiss CAPE, other valuation metrics such as the Price/Sales ratio have soared to dizzying heights as well."
This excerpt (above) is from a GMO-authored article on Morningstar: http://news.morningstar.com/articlenet/SubmissionsArticle.aspx?submissionid=224474.xml.
The US has now out-performed for a long stretch, but this is unlikely to be a permanent condition. (See handy graph of historical relative performance in the article above.)
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