What caught my eye this week.

A new report from Goldman Sachs – the title riffs on the Everything, Everywhere, All at Once movie – is filled with enough graphs and factoids to drive a dozen Weekend Reading discussions.

But the crux is Goldman’s best attempt at a snapshot of an investable world portfolio today:

Study the chart. Do you think a 2% sliver allocated to real estate looks short a few thousand Knightsbridges and Mayfairs? Congratulations – collect your gold star.

This is – theoretically – an investable portfolio. So only real estate that’s listed or accessible via funds is in the mix. There’ll also be relatively little in the way of privately-owned businesses, or rolling arable fields in the Ukraine.

That might seem okay given this portfolio tries to represent what we can actually put into our ISAs and SIPPs. But it is a pretty limited view of global assets when you think about it.

Just consider what your own home is valued at, versus your investment portfolio. For most of us it’ll be a pretty hefty share of our net worth (even if you don’t like to think about it that way for reasons inexplicable). Scale that up to global proportions and you can see the issue.

Real estate and land alone represents a massive amount of global wealth. And while the US would still comprise a vast share of global assets, I doubt it would be quite so dominant if, say, Indian and Chinese farmland was in the mix – amongst much else.

Asset allocation by Mystic Meg

There’s plenty else to ponder in the report. Not least that it inevitably drifts into a discussion of what you can hold to do better than owning a 60/40 portfolio.

Passive purists will scoff – perhaps rightly so. This seems to me a particularly dangerous exhibit:

As I understand it the graphic shows what an investor would have been best holding at various points in history, based on the subsequent performance.

But of course that future performance is unknowable in advance.

Now you don’t get to work at Goldman without being smart enough to realise this. And to be fair to the report, it isn’t saying anyone could really have shifted around to track these allocations.

However it is sort of implying it.

True it couches things with talk of ‘strategic tilting’ and ‘structural macro regimes’. But the clear implication is that you can move away from owning a dumb world portfolio and towards investing in a more smartypants one.

The future ain’t what it used to be

That might sound reasonable to some. But any Here’s What You Could Have Won portfolio that falls out of such modelling is driven by data-mining historical returns. Not by using metrics to predict the future.

I don’t think the exercise is totally worthless. In as much as it makes the case for more diversification – such as holding gold – or de-weighting very expensive markets – such as the US – then those two links will take you to similar discussions here on Monevator.

My point isn’t that a keen investor can’t potentially take steps to improve their returns beyond just blindly following the market. It’s that very often such steps will and have led investors astray. Many will indeed do better to simply let the weight of the world’s money direct their actions.

But that’s unknowable, too! The AI sure-looks-like-a-bubble could pop on Monday, the US stock market could plunge, and in five years we might all wish we’d overweighted bonds and cash and British small caps.

Who knows? Not even Goldman Sachs. But its full report is still worth a read.

Have a great weekend.

[continue reading…]

The CAPE ratio is widely considered to be a useful stock market valuation signal. So if you own a globally diversified portfolio then you may well be interested in good CAPE ratio by country data that can help you understand which parts of the world are under- and overvalued.

To that end I’ve collated the best global CAPE ratio information I can find in the table below. 

CAPE ratio by country / region / world

Region / Country	Research Affiliates (30/09/25)	Barclays Research (30/09/25)	Cambria Investment (08/10/25)	Historical median (Research Affiliates)
Global	29.4	n/a	19	23
Developed markets	31.5	n/a	n/a	24
Emerging markets	18.9	n/a	18	15.2
Europe ex UK	20.7	21.4	n/a	19.2
UK	16	17.6	15.9	14.8
US	39.3	39.1	38.1	16.5
Japan	23.4	25	23.5	31.1
Germany	18.8	24.5	19.3	17.4
China	16.2	18	16.5	14.9
India	34.6	31	36.2	22.7
Brazil	9.6	12	10.3	13.5
Australia	19.2	22.9	20.6	16.8
South Africa	19.6	22	19.7	17.9

Source: As indicated by column titles, compiled by Monevator

A country’s stock market is considered to be overvalued if its CAPE ratio is significantly above its historical average. The converse also holds. Meanwhile a CAPE reading close to the historical average could indicate the market is fairly valued.

You should only compare a country’s CAPE ratio with its own historical average. Inter-market comparisons are problematic.

There’s more countries and data to play with if you click through to the original sources linked in the table. All sources use MSCI indices. Cambria uses MSCI IMI (Investible Market Indices). Research Affiliates derives US CAPE from the S&P 500. You can also take the S&P 500’s daily Shiller P/E temperature.

But what exactly is the CAPE ratio, what does it tell us, and how credible is it?

What is the CAPE ratio?

The CAPE ratio or Shiller P/E stands for the cyclically adjusted price-to-earnings ratio (CAPE).

CAPE is a stock market valuation signal. It is mildly predicative of long-term equity returns. (The CAPE ratio is even more predictive of furious debate about its accuracy).

In brief:

• A high CAPE ratio correlates with lower average stock market returns over the next ten to 15 years.

• A low CAPE ratio correlates to higher average stock market returns over the next ten to 15 years.

The CAPE ratio formula is:

Current stock prices / average real earnings over the last ten years.

To value a country’s stock market, the CAPE ratio compares stock prices and earnings numbers in proportion to each share’s weight in a representative index. (For example the S&P 500 or FTSE 100 indices).

But company profits constantly expand and contract in line with a firm’s fortunes. National and global economic tides ebb and flow, too.

So CAPE tries to clean up that noisy signal by looking at ten years’ worth of earnings data. For that reason CAPE is also known as the P/E 10 ratio.

What can I do with global and country CAPE ratios?

The CAPE ratio has three main uses:

• Some wield it as a market-timing tool to spot trading opportunities. A low CAPE implies an undervalued market. One that could rebound into the higher return stratosphere. Conversely, a high CAPE ratio may signal an overbought market that’s destined for a fall.

• Similarly, CAPE – and its inverse indicator the earnings yield (E/P) – may enable us to make more sensible future expected return projections.

• High CAPE ratios are associated with lower sustainable withdrawal rates (SWR) and vice versa. So you might decide to adjust your retirement spending based on what CAPE is telling you.

But is CAPE really fit for these purposes?

Well I think you should be ready to ask for your money back (you won’t get it) if you try to use CAPE as a market-timing divining rod.

But optimising your SWR according to CAPE’s foretelling? There’s good evidence that can be worthwhile.

How accurate is CAPE?

It’s certainly more predictive of negative energy than being told by a woman in a wig that you’re a Pisces dealing with a heavy Saturn transit.

But the signal is as messy as mucking about with goat entrails.

The table below shows that higher CAPE ratios are correlated with worse ten-year returns. Notice there’s a wide range of outcomes:

Source: Robert Shiller, Farouk Jivraj, The Many Colours Of CAPE

The overall trend is clear. But a market with a high starting CAPE ratio can still deliver decent 10-year returns. Equally, a low CAPE ratio might yet usher in a decade of disappointment.

When it comes to hitting the bullseye, therefore, the CAPE ratio looks like this:

Portfolio manager Norbert Keimling has dug deeper. His work showed that the CAPE ratio by country explained about 48% of subsequent 10-15 year returns for developed markets.

Source: Norbert Keimling, Predicting Stock Market Returns using the Shiller CAPE

You can see how lower CAPE ratios line up on the left of this graph with higher returns, like prom queens pairing off with jocks.

There’s no denying the trend.

Not all heroes wear a CAPE

Strip away the nuance and you could convert these results into an Animal Farm slogan: “Low CAPE good. High CAPE bad.”

However animal spirits aren’t so easily tamed!

Keimling says the explanatory power of CAPE varies by country and time period. For example: 

• Japan = 90%
• UK = 86%
• Canada = 1%
• US = 82% since 1970
• US = 46% since 1881

Despite such variation, however, the findings are still good enough to put CAPE in the platinum club of stock market indicators. (It’s not a crowded field).

In his research paper Does the Shiller-PE Work In Emerging Markets, Joachim Klement states:

Most traditional stock market prediction models can explain less than 20% of the variation in future stock market returns. So we may consider the Shiller-PE one of the more reliable forecasting tools available to practitioners.

But I wouldn’t want to hang my investing hat on World CAPE’s 48% explanation of the future.

Nobody should bet the house on a fifty-fifty call.

Don’t use CAPE to predict the markets

Let’s consider a real world example. Klement used the CAPE ratio to predict various country’s cumulative five-year returns from July 2012 to 2017.

As a UK investor, the forecasts that caught my eye were:

• UK cumulative five-year real return: 43.8%
• US cumulative five-year real return: 24.5%

The UK was approximately fairly valued according to historical CAPE readings in 2012. The US seemed significantly overvalued. 

Yet if that signal caused you to overweight the UK vs the US in 2012, you’d have regretted it:

Source: Trustnet Multi-plot Charting. S&P 500 vs FTSE All-Share cumulative returns July 2012-17 (nominal)

From these returns, we can see that the ‘overvalued’ S&P 500 proceeded to slaughter the FTSE All-Share for the next five years. (In fact it did so for the next ten.)

As a result, CAPE reminds me of my mum warning me that I was gonna hurt myself jumping off the furniture. 

In the end she was right. But it took reality a while to catch up.  

Using the global CAPE ratio to adjust your SWR

The CAPE ratio is best used as an SWR modifier.

Michael Kitces shows that a retiree’s initial SWR is strongly correlated to their starting CAPE ratio:

A high starting CAPE ratio1 maps on to low SWRs. When the red CAPE line peaks, the blue SWR line troughs and vice versa. 

William Bengen (the creator of the 4% rule) concurs with Kitces’ findings: 

And Early Retirement Now also believes a high CAPE is a cue to lower your SWR.

However all these experts base their conclusions on S&P 500 numbers. Can we assume that CAPE ratio by country data is relevant to UK retirees drawing on a globally diversified portfolio?

Yes, we can.

Keimling says:

In all countries a relationship between fundamental valuation and subsequent long‐term returns can be observed. With the exception of Denmark, a low CAPE of below 15 was always followed by greater returns than a high CAPE.

Likewise, Klement found:

Shiller-PE is a reliable indicator for future real stock market returns not only in the United States but also in developed and emerging markets in general.

Michael McClung, author of the excellent Living Off Your Money, also advises using global CAPE to adjust your SWR.

The spreadsheet that accompanies his retirement book does the calculation for you. You just need to supply the World CAPE ratio and an Emerging Markets CAPE figure. Our table above does that.

Incidentally, one reason I included three sources of CAPE ratio in my table is to show there’s no point getting hung up on the one, pure number. Because there’s no such thing.

Meanwhile, Big ERN has devised a dynamic withdrawal rate method based on CAPE.

Conquering the world

Finally, if you want to use Bengen’s more simplistic Rules For Adjusting Safe Withdrawal Rates table shown above, you’ll need to translate his work into global terms.

Bengen’s over/under/fairly valued categories assume an average US historical CAPE of around 16.

You can adapt those bands to suit your favourite average from our CAPE ratio by country table.

Bengen’s work suggests that a CAPE score 25% above / below the historic average is a useful rule-of-thumb guide to over or undervaluation.

A base SWR of 3% isn’t a bad place to start if you have a global portfolio. Check out this post to further finesse your SWR choice.

Take it steady,

The Accumulator

 

1. The CAPE ratio is labelled Shiller CAPE in the graph. [↩]

They promised us flying cars. We got passwords to do our shopping. But given that secure, random, and frequently updated passwords are now the cornerstone of keeping our financial assets safe, Monevator contributor The Realist makes the case for using a password manager to wrangle them…

Nearly every aspect of our lives in today’s digital world requires a login. As a result the average person juggles dozens of online accounts. (And that’s before they’ve even gotten into stoozing…)

Count how many times a day you’re asked for some kind of account details – from reading the FT to ordering a pizza to checking your ISA. The answer might surprise you.

The challenge: how to remember all the passwords we need just to get through the day and keep on top of our financial affairs.

Common solutions include writing them down or making them all the same.

Neither stacks up in 2025. They weren’t good solutions in 2005, to be honest.

One password to rule them all

If you still rely on Post-it notes stuck to your printer, then you need a password manager. They are the best way to generate robust passwords that guard you against identify theft and financial cyber crime.

Completely random passwords will always be far stronger than those you come up with off the top of your head, or that resurrect the fading memory a childhood pet.

Password-cracking programs try all the common passwords first. They then use repeated passwords found elsewhere across the internet. You need something special to ward them off.

Enter the password manager

As password manager is a piece of software that securely stores – and often also creates – unique random passwords for your online accounts.

The password manager enables access to this encrypted database of all your passwords via a single ‘master password’, or biometrics if available on your device.

Most managers also include a browser extension that enables secure autofill logins online to save you time.

Don’t panic if those two sentences have already brought on the cold sweat of techno-fear! It’s simple once you take the first step. Good software will walk you through the process.

Obey your master

The master password is your gateway key. It’s the only password that you will need to remember. You’ll use it a lot so familiarity will help.

The best tip for an effective master password is to use a passphrase.

Brute force cyber attacks involve a trial-and-error approach until an account is compromised. A longer password – or phrase – gives a higher level of defence.

One method for creating a master password you will remember is:

• Group three words together
• Separate each word with a special character
• Add a number
• Then replace letters with more special characters to increase randomness.

For example, simply using items I can see from where I’m sat writing I can devise:

• Lamp$had3=paint!ng@c0ffee94

[Um, where does the remembering hack come in? – Ed] 

What’s in a (pass)word?

Password managers can store more than just passwords. Sophisticated password managers can safely store all kinds of information.

Think passport details, driver’s licence, insurance certificates – anything you might require on or offline, stored safely so you don’t need to have the document with you.

The benefits can be significant.

For instance, imagine being contacted regarding a suspicious transaction on some account you rarely use, whilst you’re away on holiday.

It could be a scam. But at a minimum, a password manager would enable you to log-in and check an account when you can’t even remember what username you used to set it up. Then, if necessary, you could generate, update, and store a new strong password – all from the comfort of your sun lounger.

Another idea: you could save the emergency contact details of financial organisations together with your account numbers in advance for quick access when you’ve no paperwork to hand.

Most password managers have toggles to include (or not) CAPITALS, $pec!al characters, or numb3rs – as well as the ability to choose a password length to fit the requirements of the account in question.

Password managers can also make routine changing or resetting passwords a breeze.

Some password managers will even warn you of a known data breach on a third-party website where you have an account. You can then reset your passwords with a button click. You can also choose to change all your passwords periodically for optimal security.

Advanced apps such as 1Password can do much more than just remember passwords. 

Modern bank robbers carry laptops, not balaclavas.

But by centralising and safeguarding your login credentials, you can protect your data, save time, and enjoy more peace of mind.

Using a quality password manager is like the digital security equivalent of a passive index fund investment. Fit and forget, and then it’s doing its thing in the background, 365 days a year.

There’s an app for that

Even my toothbrush now ‘requires’ me to use an associated app. It gets tedious.

But a password manager app really is one to take a look at, download, and use. It will enable the seamless syncing of all your passwords and data across any device, and allow you to login at the touch of a button or a scan of your face.

There are countless options available. I’m in no position to debate the pros and cons of each. Plenty of tech blogs out there review them if you wish to dig in.

Personally, I use 1Password and have done for years. It’s a paid service but for me it’s been flawless.

One consideration is that – similar to switching from iPhone to Android – once you go down a road you’re semi-locked into that system. Yes you can change, but the data porting may come with some pain.  (Apparently 1Password enables you to import passwords from other managers, but I’ve not tested this myself).

In researching this article, I’ve noticed I’ve a mind-blowing 219 logins stored within 1Password. The sites covered range from financial services to online stores I visited years ago to old magazine subscriptions I no longer use (but where my personal data is likely still out there.)

Another good option is Keychain, Apple’s own password manager. It’s integrated for free within MacOS and iOS. Keychain is a great option and seamless in use. The drawback is it’s limited to Apple devices.

Google has a similar one for Android though, and Microsoft offers the same for its Edge browser.

Searching for freebies

There are also many free open-source options available. (Let us have your recommendations in the comments!)

Personally, I would rather pay a small fee and have some come-back for such a critical piece of software. But many people do use free versions without issues.

The best one for you is the one that suits you. This will come down to a function of pricing, features, interface, and usability. Some password managers offer a free trial, so check to see if you can try before you buy.

I’ve listed a few popular options below, but this is by no means exhaustive:

• 1Password
• Bitwarden
• KeeWeb
• Keeper
• LastPass

Look out for a manager that supports Multi-Factor Authentication (MFA).

As you’ll probably know from using it already – even if the actual acronym has so far escaped you – MFA is an electronic security method where you must provide two or more distinct types of verification to gain access to a resource, such as a website or application.

You should always use MFA where you can. It adds an extra layer of protection to the first-line defence afforded by a password.

QWERTY1234

There is usually a buy-in period with learning any new tool. Password managers are no different.

The initial set-up can take a bit if time, particularly if all your passwords need changing from Hurst66 to ZbP=!pziAJx2v4efc4V7J.

But once you’re done, ongoing maintenance is easy.

Many password managers will prompt you to save passwords when you first log into sites online. This way you can steadily change them as you come to use them.

That’s particularly handy with some of the less frequently used logins, such as pension accounts where you may not have daily, weekly, or even monthly interactions. [Um, speak for yourself – Ed]

Securing your financial future

In an age where cyberattacks are increasingly sophisticated, password management is no longer optional. It is essential to protect your personal and financial data.

If your preferred method is a little black book that’s locked in a safe, then fine. As I said above, the best password manager is the one that works for you.

But you should still change your passwords regularly. Keep them random and don’t use the same one for Tesco that you use for your online broker.

Like it or not, our lives are becoming more digitalised. For starters, you are reading this on a digital platform.

But password management software is designed to work with you, not against you, and today’s tools offer a blend of convenience and security that manual methods simply cannot match.

Further reading:

• Tips from the National Cyber Security Centre