Is the US overpriced? Where should we diversify outside the US?

Is the US overpriced?

As expected, US markets are starting to cool off from initial euphoria. Given the low volatility environment meaning we may see a slowing of the momentum and risk-on trades, not necessarily a pre-election reversal. The markets may have fully incorporated the expectation that the new Republican controlled House, Senate and President is a positive for a more business friendly environment, ideally creating greater GDP growth. While the reality may not be known for several months if not years, we should focus on the sentiment for now.

Perhaps we’ve gotten a little overextended in large caps but given small and mid-caps were so undervalued, they still look attractive at these valuation levels. The valuation spread between large caps and Small-Mid has been decreasing over the last month and may finally revert to the historical pattern of being higher than large caps.

Relative Value outside the US?
Given the fast appreciation of US large cap stocks, it might also be worthwhile to diversify into other countries. Short-term trade is Canada based on non-renewable energy interest.