Selectivity is key

The US market as a whole is expensive — both relative to its own history and compared to the rest of the world. But does that mean we should avoid US equities entirely? At ECP, we don’t think so. We continue to allocate capital to US equities, with one important caveat: we now invest much more selectively rather than blindly tracking the reference index.

Once you look beneath the surface, valuations become far less extreme. The equal-weighted S&P 500, for example, trades roughly in line with its 20-year valuation range, and the mid-cap universe even trades below its long-term average multiple. These are the segments where long-term investors can still find value.