To protect your wealth from historically stretched U.S. valuations, consider diversifying beyond the S&P 500 (SPY) by adding European index funds to your portfolio. European equities currently trade at roughly half the valuation multiple of comparable U.S. sectors, offering an attractive entry point for overlooked value. A weaker U.S. dollar provides an added performance boost for American investors by increasing the dollar value of foreign holdings. Keep in mind that European markets lack the heavy artificial intelligence exposure driving U.S. tech, making them a defensive play rather than a growth-chasing trade. Allocate a portion of your new investments to European equities today to reduce over-concentration in mega-cap U.S. stocks.

European Index Funds

• Scott Galloway invests in European index funds for portfolio diversification, noting that he wants to avoid getting poor rather than trying to get rich at this stage in his life.
• European equities trade at roughly half the valuation multiple of similar sector exposure in the U.S., and Europe has been largely left for dead by investors, creating an opportunity.
• European stocks outperformed the S&P 500 in 2025 (with the Euro Stoxx 50 returning about 38% in dollar terms compared to 18% for the S&P), driven partly by a falling U.S. dollar and lower tech/AI exposure.
• A weaker U.S. dollar gives U.S. investors a double boost, as a stronger euro makes European holdings worth more when brought home.
• Risk factors mentioned include lower overall wage growth in Europe and the fact that European economic growth may take longer compared to the U.S.

Takeaways

• Consider adding European index funds on top of existing U.S. holdings to achieve better geographic diversification, rather than selling out of the U.S. entirely.
• Keep in mind that European markets have less exposure to the artificial intelligence boom, which has driven massive run-ups in U.S. tech stocks.

S&P 500 Index Funds (SPY)

• The S&P 500 is heavily concentrated, with just ten companies making up 40% of the index, meaning standard S&P index investing does not provide true diversification.
• U.S. valuations are historically stretched, with the S&P's Shiller Index sitting around 41 (compared to a historical average of 17), which is the second highest reading in 140 years, behind only the dot-com peak.

Takeaways

• Recognize that relying solely on S&P 500 index funds leaves a portfolio highly concentrated in a small group of mega-cap tech stocks trading at historically high valuations.