JPMorgan: Non-U.S. Equities Trade at ~25% Discount to U.S. Stocks, Valuation Gap Near Historical Extremes
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JPMorgan data show non-US stocks trading at roughly a 25% discount to US peers — near the widest gap on record — yet the cheapness has repelled, not attracted, global allocators.
What does a 25% discount actually mean?
MSCI World ex-US constituents carry a forward P/E — the price investors pay per dollar of expected next-year earnings — of only about 75% of the US level.
In plain terms = for every dollar of profit, a non-US company's stock costs roughly three-quarters of what a comparable US company's stock costs.
This gap is near its all-time low — non-US equities have almost never been this cheap relative to the US.
If they're cheap, why isn't money flowing in?
JPMorgan strategist Michael Cembalest likened the discount to a "bug zapper" — the glow looks inviting, but what flies in gets burned.
This means → for many global allocators, low valuations are not a buy signal but a risk warning: cheap may mean weaker fundamentals, not a bargain.
The result: capital keeps avoiding non-US exposure, and the discount persists uncorrected.
How did the gap widen to this point?
In the mid-2000s, non-US equities traded at valuations near or even briefly above US levels — globalisation was accelerating and emerging markets were booming.
Since then, US mega-cap tech has consistently outperformed global peers, and US earnings growth has led the world, widening the gap year after year.
This reflects a nearly two-decade tilt in global equity returns toward the US — not merely a sentiment preference.
Any sign of reversal this year?
Non-US stocks have staged a modest rebound year-to-date, yet JPMorgan Asset Management and Bloomberg data show the discount remains close to 2024 levels.
Capital flows still show no clear shift toward non-US markets — money has not yet "voted with its feet."
This means → whether non-US equities can convert their valuation edge into actual inflows still depends on earnings fundamentals catching up — cheapness alone is not enough.
Content is for reference only, not financial advice.