The Globe and Mail reports in its Friday edition that U.S. stocks appear quite expensive by several valuation metrics, while Canadian shares seem like a bargain in comparison. The Globe's Matt Lundy writes that currently, U.S. equities are more pricey than they have been in recent history, as indicated by the cyclically adjusted price-to-earnings (CAPE) ratio. This metric evaluates stock performance over the entire economic cycle by dividing the share prices of S&P 500 companies by their average inflation-adjusted earnings over the past 10 years. This ratio is often referred to as the Shiller ratio, named after economist Robert Shiller. Investors frequently use the CAPE ratio to gauge the potential long-term returns of a group of stocks. In this case, the high CAPE ratio of 36.6 implies that there is limited upside for U.S. shares in the coming years. According to a recent forecast by Goldman Sachs analysts, the S&P 500 is expected to yield an average annual return of only 3 per cent over the next decade, a significant decline from the 13 per cent annual gains seen in the previous decade. Meanwhile, the CAPE ratio for Canadian stocks was 24 in September -- about equal to the previous 20-year average.