The Global Equity Relative Value Trinity
I featured this chart in my 10 Charts to Watch in 2025 post, but I thought it would be worth just spelling out exactly what it is and implications for investors.
What we’re looking at is relative value indicators.
When the indicator is very high it means the first mentioned one is more expensive than the second mentioned (e.g. in 2007 global stocks were very expensive vs US stocks). When it is very low, it means the first is cheap vs the second (e.g. right now global stocks are very cheap vs US stocks).
There’s two ways to look at this: 1. US/Large/Growth is expensive vs everything else, and is at risk of catching-down; and/or 2. Global/Small/Value are cheap, and the upside opportunity is they catch-up.
In other words this chart reflects what I think is a multi-decade upside opportunity for those showing up as cheap on this chart (Global, Small, Value), and also tells us to be alert to downside risk on the other side of things (expensive US/Large/Growth).
$S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $NASDAQ 100(NDX)$ $Invesco QQQ(QQQ)$ $Dow Jones(.DJI)$
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