It is difficult to find attractively valued assets today. Interest rates in the developed world remain near record lows, and investors continue to pour into riskier assets, driving up valuations. U.S. stocks have enjoyed a five-year rally, with the S&P 500 currently trading at a trailing 12-month price/earnings multiple of 18 times, above their historical average of 15 times. Certain pockets of the emerging markets are also trading at lofty valuations, thanks to new market-friendly reforms (Mexico) or a relatively strong near-term growth outlook (the Philippines).

Markets trading at depressed valuations, such as Russia and China, are likely to remain cheap in the medium term. Russian firms are operating in a weak domestic environment that is further hampered by Western sanctions and falling oil prices. As for China, many large firms, which used to enjoy a relatively oligopolistic operating environment, face an uncertain future as the government pursues a confounding reform agenda that tries to combine both market liberalization and state-control ideologies.

Trailing 12-Month P/E Ratios