How This Tool Works

This tool estimates expected real returns for global stocks based on the current CAPE ratio (Cyclically Adjusted Price-to-Earnings). Historically, higher CAPE ratios have correlated with lower future long-term returns.

One way to estimate a global CAPE is to blend regional CAPEs by market cap weights. For example, a 50/50 blend of USA CAPE 37 and Europe CAPE 20 yields a global CAPE of 28.5 and an expected 10-year real equity return of ~3.57%.

Source: Barclays Global CAPE Index

The scatterplot below shows how starting CAPE ratios relate to historical 10-Year Sharpe Ratios (risk-adjusted returns), using actual historical data.