Is It Time to Look Beyond the US Market?

Why valuations, concentration, and crowding might be a good reason to take stock of your portfolio.

There’s a saying often used by active fund managers: ‘When everyone’s on the same side of the boat, it doesn’t take much to tip it over.’

It’s a neat way of capturing a big idea. When investors crowd into the same market, the same assets, or the same story, the risk isn’t just that they’re wrong. The real danger is what happens when the tide turns, and there’s no one left on the other side to catch the fall.

Today, much of the world’s capital is leaning hard to one side of that boat: the US equity market.

A market trading well above its historical average

At the time of writing (15 October 2025), the twelve-month trailing price-to-earnings (P/E) ratio for the S&P 500 Index is 29.69 times, according to Macrotrends. For context, since the 1950s, the S&P 500 has averaged a P/E ratio of 15–17 times. Bringing today’s valuation to roughly double the long-term norm.

This isn’t entirely unprecedented. During the dot-com boom of 1999, P/E ratios briefly exceeded 44 times. In 2021, they touched 40 times. So yes, valuations could climb higher. But it’s also a reminder that markets don’t stay stretched forever. When things are priced for perfection, it doesn’t take much for sentiment to shift.

P/E isn’t the only measure of valuation. There’s price-to-book, Shiller CAPE, price-to-sales, and enterprise value, to name a few. They each offer their own lens, but right now, they’re telling a similar story: valuations are elevated.

The AI boom and market concentration

It’s hard to escape the noise around artificial intelligence (AI). Depending on who you ask, AI is either the greatest investment opportunity of our time… or a bubble waiting to burst.

There are echoes here of the late 1990s, when the internet transformed expectations, and valuations. Today, a handful of companies are driving much of the market’s performance. The so-called ‘Magnificent 7’, Apple, Microsoft, Nvidia, Amazon, Meta, Alphabet, and Tesla, dominate major indexes.

To put it in numbers, Nvidia alone accounts for around 8% of the S&P 500 Index. The top 10 companies make up almost 39% of the entire index. Out of 500 constituents, just a handful hold extraordinary sway over performance.

Why does this matter to you? Because if you own a ETF passive global tracker, it’s highly likely those same top positions in the S&P 500 appear, in very similar weightings, in your global fund too. Even if you hold a separate US fund, chances are, you’re effectively doubling down on the same names.

What happens when crowds lean one way

When markets become this concentrated, asymmetrical risk builds up. That means if the consensus, in this case, the big AI story, proves even partly wrong, the correction can be sharp. With so many investors on the same side of the trade, there’s less balance in the market. If people rush for the exit at once, prices don’t drift gently lower. They can fall considerably.

This doesn’t mean the US market is destined to fall. It simply means your exposure may be more concentrated than you realise, even if you think you’re diversified through global funds.

Bulls, bears, and the messy middle

Of course, pointing out high valuations is one thing. Acting on them is another. Some market commentators have been warning about a downturn and recession risk for years, and if you’d moved too early, you might have missed substantial gains.

You’ll hear bulls say, ‘This time is different,’ arguing that AI represents a structural shift that justifies higher valuations. You’ll hear bears claim, ‘We’re at an inflection point,’ warning of a sharp correction.

If these are the messages professionals are putting out, it’s understandable if you feel caught in the middle. Investing rarely offers absolute certainty. But what you can control is your exposure, your comfort with risk, and how well your portfolio reflects your personal goals, not just today’s market narrative.

Practical reflections before you act

This isn’t about rushing to sell or chase new opportunities. It’s about regaining visibility over where your portfolio may be most vulnerable, and where it might be lacking balance.

Here are some useful reflection points:

1. Check your concentration. Look through your funds. How much of your portfolio is effectively tied to the same few US mega-cap names? Sometimes, what looks diversified on the surface isn’t so diversified underneath.

2. Think beyond ‘global’ labels. A global tracker can still have heavy US exposure. In many cases, the top 10 holdings of a global index are almost identical to the S&P 500’s. That’s not inherently bad, but it’s important to know what you actually own and what your concentration is.

3. Explore other regions or strategies. If you prefer a passive structure, regional index trackers can offer diversification. If your preference is for active managers, consider fund managers who aren’t ‘benchmark huggers’, those already looking beyond the crowded trade. Not all active funds are equal; some simply replicate the index with higher fees, while others take a more differentiated approach.

4. Know your own comfort zone. There’s no perfect time to diversify, but there are better times to understand your risk. A period of elevated valuations and concentrated positioning is one of them.

Final thought: balance over prediction

No one knows how long a market can stay hot. History tells us it can stay that way longer than many expect. But history also shows that consensus trades don’t last forever. When everyone’s on one side of the boat, small shifts can cause big waves.

Diversifying isn’t about betting against the US or trying to outguess the market. It’s about building resilience into your portfolio so that you’re not overexposed to a single story, however exciting it may be.

This is your portfolio, your journey, and your decision. The goal isn’t to predict the future perfectly. It’s to make sure your portfolio is curated to navigate it, whatever happens next.

Disclaimer: This article is for information and educational purposes only. It expresses my personal views and frameworks for thinking about markets and investing. It does not constitute investment advice or a financial promotion, nor is it a personal recommendation to buy or sell any investment. Everyone’s situation is different, so if you are unsure about a decision, it’s important to seek guidance from a qualified financial professional.

The views, forecasts, and figures included reflect analysis at the time of writing, unless otherwise stated. sources used are believed to be reliable, but markets and circumstances can change quickly, which means our views may also evolve over time.