The table below presents the price-to-earnings (P/E) ratios of the world’s largest stock markets, based on their respective benchmark equity indices. It includes both trailing and forward P/E ratios for each country.

At present, India and the United States stand out as the most expensive markets. In contrast, among the largest global economies, the stock markets of Hong Kong and South Korea appear to be the most undervalued, with earnings growth in both regions being disappointing over the past few years.

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Global P/E (Price-Earnings) Ratios by Country

* The EPS (Earnings-per-Share) in the table above has been indexed with a base value of “100” as of January 1, 2022. The EPS represents the total trailing 12-month earnings of a country’s benchmark equity index.

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Valuations of Global Stock Markets in 2025

• United States: The most consistent story of the global equity markets over the past years has been the outperformance of U.S. compared to all other developed or emerging stock markets. The U.S. stock market continues to exhibit high valuations, driven by strong corporate earnings and investor confidence. However, concerns about overvaluation, particularly when it comes to the Magnificent 7 companies, persist.

• Europe: European stocks have started the year 2025 strongly which has surprised most investors. This surge is attributed to valuation gaps and potential positive catalysts, such as easing geopolitical tensions and favorable fiscal policies. Despite these gains, long-term sustainability remains uncertain due to structural challenges.

• United Kingdom: The FTSE 100 reached a new all-time high in February 2025, despite the UK’s economic challenges. This performance is linked to the fact that only 22% of FTSE 100 companies’ revenues are generated in the UK, with significant contributions from North America and the Asia-Pacific region. A weaker pound has also benefited companies with earnings in dollars and improved the competitiveness of UK exporters.

• Australia: Australian companies are facing a crucial earnings test to justify their high valuations, with the ASX200 trading at over 18 times future earnings, significantly above its decade average. Analysts warn that there is little room for error, and high valuations may not be sustainable if earnings disappoint.

• Emerging Markets: Investors are reevaluating strategies in emerging markets like China and India. Despite China’s rapid GDP growth and lower starting valuations, its stock market performance has been miserable compared to India’s equity market. India’s stock market has produced steady returns since the COVID crash, although the end of 2024 and beginning of 2025 has been difficult for Indian equities.

Trailing & Forward Price-Earnings Ratios

The price-to-earnings (P/E) ratio is perhaps the most fundamental metric used by investors when evaluating both individual companies and entire markets. Its simplicity and ease of calculation make it an essential tool for assessing valuations. However, the challenge arises when selecting which earnings figures to use for the calculation.

When using trailing earnings—calculated as earnings per share (EPS) over the previous 12 months—investors can be confident in their analysis since they are working with actual historical data. This approach provides clarity, as the figures are based on verified performance rather than projections, which can sometimes prove overly optimistic or pessimistic. Trailing P/E ratios reflect the company’s true, recent financial performance, offering a grounded perspective on its value.

However, investing inherently involves forecasting future performance, and the well-worn saying, “past performance is no guarantee of future results,” remains a critical reminder. Stock analysts typically rely on forward-looking earnings estimates to predict future growth, making the forward P/E ratio a valuable tool. While analysts tend to be fairly accurate with their earnings projections in stable economic conditions, their predictions often fall short during times of economic upheaval, such as recessions. In these turbulent periods, forecasts based on linear models become less reliable, as these models fail to account for sudden and severe market disruptions.

Another consideration when using trailing figures is whether to base the earnings on net income or operating income. Net income includes all expenses, including taxes, interest costs, and non-recurring items like lawsuit settlements or asset write-downs. Operating income, on the other hand, excludes these items, offering a “cleaner” view of a company’s core profitability. The ratios presented in the table above use net income, which accounts for taxes and interest expenses, and includes negative earnings in the calculations. This approach provides a more comprehensive snapshot of a company’s financial health, factoring in all relevant costs and obligations.