The equity markets are pricing in a significantly slower growth for most of the world than we've experienced in the past decade. In spite of the MSCI World Index (global equity index) being up some 11% year to date, the price to earnings ratios (PE) remain at the low end of the range for all major equity indices except for the UK. Low PE multiples tend to indicate slower growth expectations.
|PE ratios relative to the range from the past decade (Source: Barclays Capital)|
Emerging markets in particular (driven by China) are priced for much weaker growth rates relative to historical levels. Australia and the US are also trading near the bottom of the PE range.