The premium that investors are paying for US stocks means there is very little room for upside, with the S&P 500 on a forward price/earnings (PE) ratio of 18.5 and a yield of 2 per cent - especially as the US market is much more advanced in the recovery cycle and rates are tightening. So if you want exposure to overseas developed markets, you might be better looking at Japan, which looks relatively cheap, particularly compared with the US. Japan's Topix index is trading on a much more reasonable estimated 2017 PE ratio of 14.8 and yields 2.1 per cent.
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