How cheap are the world's stock markets?

V ALUATION is key to making investment decisions. Invest when markets are expensive and future returns are likely to be poor over the medium to long term. Buy when markets are cheap and the odds are stacked much more in your favour.

But a word of warning - valuations are useless at predicting stock market behaviour over short time frames when fear, greed and other noisy factors tend to dominate.

When considering equity valuations there are many different measures that investors can turn to. Each tells a different story. They all have their benefits and shortcomings so a rounded approach which takes into account their often conflicting messages is the most likely to bear fruit.