Perhaps it is, but there aren’t many alternatives left
I'm not a staunch supporter of fundamentals, but if there's one I truly endorse, it's economic freedom as a predictor of future prosperity. The freer the market, the more prosperous the nation, and its stock market mirrors this.
Therefore, it doesn't make sense to me to consider Chinese or European stock markets as bargains just because the U.S.A. may be overvalued. It might be, and it may correct. However, fundamentally, I prefer aligning my fortunes with a country that stands out as one of the cleanest shirts in the laundry basket despite not being flawless in terms of economic freedom. Cheap is cheap for a good reason. Can a country with centralized command ever surpass the U.S.A.? I highly doubt it unless the U.S.A. becomes less free someday.
The charts below showing the performance of the S&P500 vs. the Chinese large-cap ETFs tell the whole story.
Finally, never forget that valuations have zero predictive power of the stock market performance one year ahead, and, as market timers our time horizon for a trade rarely exceeds one year. So, high valuations for the U.S. stock market are not an excuse for trying to catch falling knives around the unfree world under the misguided assumption that they are “cheap”. Don’t forget that trends tend to persist, and “cheap” will probably become “cheaper”.
Editor of thedowtheory.com