Robert Shiller: It’s time to diversify out of the United States – here’s the best place to go

Nobel Prize-winning economist Robert Shiller is encouraging investors to go abroad as U.S. stocks hit fresh record highs.

The Yale economics professor argues that Europe offers the most upside for U.S. investors right now, and it could protect them from growing risks at home.

"Europe should be a big thing in one's portfolio. Their price-to-earnings ratios are much lower," Shiller said Wednesday on CNBC's "Trading Nation." "It looks bad because they've been through troubles recently. But people sometimes exaggerate those troubles."

Those challenges include Brexit, the French election and a rise in terrorist attacks — as well the debt crisis affecting countries such as Greece, Spain and Ireland.

"We have a lot of bad narratives about Europe. But you have to think back at the long history. Europe has done quite well," added Shiller, who says it's hard to predict if U.S. stocks will continue to rally in the coming days or see a deep correction.

"Most Americans are not well-diversified globally. When we're talking about the 'Trump effect,' that is primarily a U.S. effect. You can solve that problem by diversifying around the world," said Shiller.

He's particularly concerned that the "Trump story" is overshadowing other news that could affect the stock market's path. He also cites the emerging threat of a war with North Korea as a risk.

"We're living in very volatile times. We don't know what to expect," he said.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

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