Is XEQT Too US-Heavy Right Now?
XEQT puts 45% of your money in US stocks. Critics say that is too much. The data says something more interesting.
The actual question
This question has become more pointed since 2023. US tech stocks drove extraordinary global returns, valuations climbed to historical extremes, and investors who looked at XEQT's composition started asking: am I too exposed to one country that is now priced to perfection?
It is a genuinely intelligent question. It deserves a direct answer rather than reassurance. The answer, however, is more nuanced than either the bulls or the critics acknowledge, and it contains a structural irony that most people raising this concern have missed entirely.
What 45% US exposure actually means
XEQT allocates approximately 45% of its assets to US equities through its ITOT and XTOT sleeves. This is the largest single country allocation in the fund. It feels large. Here is why that perception deserves scrutiny.
The US equity market is the largest, most liquid, and most diversified stock market on earth. It contains companies that operate globally: Apple generates the majority of its revenue outside the United States. Microsoft, Amazon, Alphabet, Meta, and NVIDIA are global businesses that happen to be listed on a US exchange. Owning US equities is not purely a bet on the US economy. It is partly a bet on global technology and services delivered by companies domiciled in the US.
Furthermore, the 500 largest US companies derive roughly 40% of their total revenue from outside the United States. When you own XEQT's US sleeve, you own substantial international business exposure embedded within those US-listed companies.
XEQT vs the true global market weight
Here is the structural irony critics miss: XEQT is not overweight the US. Relative to true global market capitalization, XEQT is actually underweight the US by nearly 20 percentage points.
| Region | XEQT Weight | Global Market Cap Weight | vs Global |
|---|---|---|---|
| United States | ~45% | ~64% | -19% |
| Canada | ~25% | ~3% | +22% |
| Intl Developed (ex-US) | ~25% | ~27% | -2% |
| Emerging Markets | ~5% | ~6% | -1% |
The fund that is actually "too US-heavy" is any pure S&P 500 ETF like VFV or VOO, which put 100% of your money in the US. XEQT, by comparison, is a significant reduction in US concentration relative to what pure market-cap weighting would deliver. The critics are pointing at the wrong fund. For a full comparison, see XEQT vs VFV: Global Diversification vs Pure S&P 500.
US concentration risk is real
Acknowledging that XEQT is underweight the US relative to global market cap does not mean US concentration risk is not a legitimate concern. It is. The S&P 500's top ten holdings now represent over 35% of the entire index by market cap. Five companies (Apple, Microsoft, NVIDIA, Alphabet, Amazon) account for more than 25% of the index. These valuations, as measured by price-to-earnings ratios, price-to-sales ratios, and cyclically adjusted P/E ratios (CAPE), are historically elevated by most standard metrics.
When a small number of very large companies represent an outsized share of global equity indices, the risk of mean reversion is real. If those companies underperform their current valuations over the next decade, the drag on global index returns will be meaningful. XEQT is not immune to this risk. It owns those companies through its US sleeve.
What XEQT does provide is mitigation. At 45% US versus 100% in a pure S&P 500 fund, a 30% US equity correction would reduce XEQT by approximately 13.5% from the US sleeve alone. The same event would reduce a 100% S&P 500 fund by 30%. XEQT's diversification is a genuine hedge against US-specific risk.
The lost decade: when US underperformed
The concern that the US is "priced for perfection" is not new and has occasionally been correct. The decade from 2000 to 2010 is the most instructive case study available.
During that decade, US equities delivered approximately 0% cumulative real return. International developed markets returned roughly 15% cumulatively. Emerging markets returned over 150% cumulatively. An investor who held only US equities through that decade ended up flat. An investor with global diversification did meaningfully better.
The 2000-2010 period began with valuations that looked, at the time, similarly elevated to where they stand in 2026. The CAPE ratio on US equities was around 44 at the peak of the dot-com bubble. It is approximately 34 to 38 in early 2026 depending on the calculation method, elevated but not at the extreme levels of 2000.
Nobody predicted in 1999 that US equities would spend the next decade going nowhere while emerging markets tripled. The same uncertainty applies today. This is precisely the argument for diversification, and it is the argument XEQT's construction embodies.
The US has outperformed international markets for approximately twelve consecutive years. Investors have been trained by that experience to view US concentration as smart and diversification as unnecessary. The 2000-2010 lost decade was preceded by exactly the same investor sentiment: US equities had outperformed for a decade and everyone wondered why you would own anything else.
US valuations in 2026: the honest assessment
As of early 2026, US equities trade at elevated multiples by most historical measures. The Shiller CAPE ratio sits above 35, a level historically associated with lower forward ten-year returns. This does not predict a crash. Markets can remain at elevated valuations for years and continue rising. But it does suggest that expected forward returns from US equities over the next decade are likely to be lower than the exceptional returns delivered over the previous decade.
International developed markets and emerging markets, by contrast, trade at significantly lower valuations. European equities trade at a CAPE of approximately 18 to 20. Emerging markets trade at an even steeper discount. If mean reversion occurs and international markets rerate toward historical averages while US valuations compress, XEQT's non-US allocation becomes a meaningful tailwind.
None of this is a timing call. Valuation-based arguments for international outperformance have been made since 2015 and have been consistently wrong as US tech extended its dominance. Making portfolio decisions based on valuation alone is market timing with extra steps. The correct response to valuation uncertainty is diversification, which is what XEQT provides.
Why Canada is overweighted and why that matters
The most striking thing in XEQT's allocation table is not the US weight. It is Canada. At approximately 25% of the portfolio, Canada is allocated eight times its global market cap weight of roughly 3%. This is a deliberate home-country bias built into the fund's construction philosophy.
For a Canadian investor, this overweighting serves several functions. The Canadian dollar is your spending currency, your mortgage is denominated in it, and your employment income arrives in it. Holding a significant portion of your long-term savings in Canadian-dollar assets reduces currency risk. When the Canadian dollar falls relative to the US dollar, the US portion of XEQT becomes more valuable in CAD terms, providing a natural hedge. But when the CAD rises, the reverse applies.
The Canadian equity market is also structurally different from the US market. The TSX is heavily weighted toward financial services (the Big Six banks), energy (Suncor, Canadian Natural Resources, Cenovus), and materials (gold miners, fertilizer companies). These sectors provide genuine portfolio diversification from the US tech-heavy composition. In 2022, when US tech stocks fell 30 to 50%, Canadian energy companies were up significantly. XEQT's Canada sleeve provided a meaningful cushion that year.
What to actually do about it
If you are genuinely concerned about US concentration in XEQT, there are two coherent responses. Both involve accepting some tradeoffs.
Do not switch to a 100% Canadian equity fund to reduce US exposure. The TSX has significant concentration risk of its own (financial services and energy together represent over 45% of the index). Avoiding US concentration by creating Canadian concentration is not diversification. It is a different bet. For a full breakdown of every country and region inside XEQT, see the XEQT holdings guide.
The verdict
XEQT is not too US-heavy relative to true global market capitalization. It is substantially underweight the US compared to any pure market-cap weighted global fund. The concern, when honestly examined, is really a concern about US equity valuations and the possibility of a multi-year period of US underperformance. That concern is legitimate and worth taking seriously.
XEQT's construction, with its deliberate Canada overweight and meaningful international and emerging markets allocations, is precisely designed for the scenario where US equities stop leading global returns. If that scenario materializes, XEQT investors will be better positioned than those holding 100% US equities. If the US continues to lead, XEQT investors will participate in roughly 45% of that upside while enjoying the stability of broader diversification.
The fund you are criticizing for being too US-heavy is the same fund best positioned to protect you if US outperformance ends.
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