How high valuations and fiscal risks could reshape US equity markets

US exceptionalism has driven equity markets to new highs, with the S&P 500 delivering consecutive years of strong returns and dominating global indices. However, extreme market concentration, historically high valuations, and rising fiscal risks suggest this trend may not last indefinitely. The current environment mirrors past periods of market exuberance, yet structural differences—such as high debt-to-GDP ratios, inflation pressures, and tight labor markets—raise questions about whether this cycle can persist. As investors consider the risks of mean reversion, strategies focused on discipline,...