On Sunday, fifteen large and influential Asia- Pacific economies such as China, Japan and Australia signed the world’s largest trade agreement, The Regional Comprehensive Economic Partnership (RCEP). The partnership will take months to come into effect.
The partnership covers nearly 30% of the world population and approximately a third of the world’s GDP. It aims at progressively lower tariffs, to counter protectionism, boost investment, and allow freer movement of goods within the region.
On the other hemisphere, the U.S Wilshire 5000 to GDP ratio, a long-term valuation indicator calculated by dividing GDP from total Market Capitalization, is at an all-time high. As of Friday, it stands at 1.704, more than double the historic mean average of 0.8 and higher than what it was during the Housing Bubble of 2008 (1.059).
The historically high valuation of the U.S. stock market combined with the RCEP trade agreement signed this weekend may incentive investors to tilt their portfolios to Asian markets.