Why Fundamentals Justify High U.S. Equity Valuations

Core Viewpoint - The article discusses the high valuations of U.S. equities, particularly the S&P 500, and argues that these valuations are justified by strong economic fundamentals rather than being overvalued [1] Group 1: Economic Fundamentals - Economic and earnings growth remain resilient, with global earnings revisions trending higher and profitability expanding beyond the technology sector [1] - Rising productivity and ongoing adoption of artificial intelligence (AI) are expected to reinforce record-level profit margins and long-term earnings growth [1] Group 2: Sector Performance - The technology sector contributes significantly to the high valuations of the S&P 500, as it has a higher price-to-earnings ratio compared to the index itself [1] - Earnings growth is broadening across various sectors and regions, including U.S. small-cap stocks and international equities in Japan and Europe [1] Group 3: Investment Strategies - The BNY Mellon Concentrated Growth ETF (BKCG) offers a focused approach to investing in large-cap securities, aiming to capitalize on opportunities within the S&P 500 [1] - BKCG employs a buy-and-hold strategy, selecting 25-35 companies based on fundamental analysis, which allows for returns driven by individual stock performance rather than overall market momentum [1] - As of December 31, 2025, BKCG's net asset value (NAV) increased by 14.58% year-to-date, demonstrating the effectiveness of its concentrated investment strategy [1]