The transatlantic valuation gap

In terms of price-to-earnings, European equities today trade at a slight discount compared to where they stood 10 years ago. Importantly, in Europe valuations are not driven by a handful of mega-caps but are more evenly distributed across the market.

The US picture looks radically different. Not only do American equities trade at a significant premium to their historical averages, but overall market valuations are now heavily skewed by the dominance of the 7 largest companies.

At ECP, we continue to stress the importance of looking beyond headline indices and focusing on the underlying earnings power of companies — an approach that helps investors avoid distortions created by excessive concentration.