As we approach the end of 2025, you may come across numerous articles highlighting that international stock indices have significantly outperformed U.S. stock indices, such as the S&P 500, this year—a trend not seen in a while. However, the chart below illustrates that the disparity in valuations remains substantial.
The PE10, or price-to-10-year average trailing earnings ratio (also known as the CAPE ratio or cyclically-adjusted P/E ratio), aims to smooth out fluctuations in earnings. Image source: TopDownCharts.
