The S&P 500 (+0.8%) and the NASDAQ (+1.3%) rallied to fresh all-time highs on 23 April, lifted by better-than-expected corporate earnings. That completes a remarkably swift turnaround for the two US equity indexes; the descent from the previous record highs to December’s lows took 65 and 79 trading sessions, respectively, while both clawed their way back to new all-time highs in just 81 trading sessions.

Being at an all-time high can leave some investors feeling uneasy about being invested in the market, but we see reasons why investors should not be fearful of a sharp downturn:

* Using S&P 500 price data since 1950, after stocks have set an all-time high, their subsequent six-month price return has been 4.67%. If you were not investing at the peak and instead waited for any other day, your average subsequent six-month return would have been 4.24%. Furthermore, when the index has reached a peak, large falls are also less common. Following an all-time high, the market has declined more than 5% over the subsequent six months just 10.7% of the time, compared to the 18.1% historical occurrence when there hasn't been a peak.

* US stocks look fairly valued. The trailing price/earnings ratio for the S&P 500 is currently 18.1x, compared with a 20-year average of 18.3x and an average since data became available in 1987 of 17.7x. In addition, the misery index for the US (the sum of the unemployment rate and the inflation rate) is currently just 5.7%. Historically, when the misery index is below 6.4%, the S&P 500 has traded on a trailing price earnings ratio of 20.1x.

* A more accommodative Federal Reserve and a potential (at least partial) resolution to US-China trade tensions appear to be priced in. But there is scope for earnings growth to continue to support the market. S&P 500 earnings growth is likely to be flattish during 1H19 before rebounding later in the year. Leading indicators of profit growth – access to capital and business sentiment – remain favorable, suggesting an improvement ahead. We expect 3% earnings growth in 2019 and 4% over the next 12 months.Even though US stocks are not expensive, we think it prudent not to overallocate to them at this stage, and we see better opportunities in other markets. With a forward P/E of 16.9x, US equities are trading at a 13% premium to global equities and 4% above their 10-year average relative to global equities. We think the best value in risk assets presently lies outside the US. We now overweight Japanese, emerging market and Canadian equities.