Price to earnings ratios for global equities look low because of the increasingly heavy weight in lower-multiple sectors, such as the financials and energy stocks, suggests BCA Research in a new research note.

Global equities look cheap relative to history, especially given today’s low interest rates, BCA notes. “The increasing concentration of global equities in the financial and oil & gas sectors may be one reason P/Es have stayed low in recent years,” it suggests. These sectors now account for about 35% of total market capitalization and more than 40% of earnings, BCA reports.

BCA says that these two sectors typically sell at modest P/Es, “in part because of the historical volatility of their earnings and their lower long-term expected earnings growth”.

“The bottom line is that the sectoral composition of the global equity markets is contributing to the current low P/E ratio,” it says.