Thanks to the magnitude of the advance, Australian stocks are now trading for roughly 15.3x this year’s earnings and at a premium to both the United States and Europe. This valuation seems unjustified considering not only Australia’s cooling growth but also the declining profitability of Australian firms. The country’s large mining companies in particular are facing oversupply challenges and potential weaker demand from China.

That said when I look out at an investment horizon longer than a year, Australia is still one of the smaller, developed “CASSH” (Canada, Australia, Switzerland, Singapore and Hong Kong) countries that I like over the long term. The “CASSH” countries exited the financial crisis in far better shape than Europe, Japan or even the United States.

Australia in particular has an exceptionally low debt burden, a budget close to balanced, a profitable corporate sector, a sustainable pension system and a benign inflation outlook. In addition, thanks to its large banking sector, Australia offers one of the highest dividend yields among developed countries.

As such, I would look to upgrade my short-term view of Australia on a pullback in valuations, but for now I’m advocating reducing exposure to this market.

Russ Koesterich, CFA, is the iShares Global Chief Investment Strategist.