The forward PE of the S&P500 is presently 15 which is a little below its historical average of 17 value since 2000. Refer to figure 2:
yardeni.com: S&P 600 | Charts | Yardeni Research

This contrast with the forward PE of the S&P500 now trading at 22 versus its 25-year average of 16. Refer to figure 9:
yardeni.com: S&P 500 | Charts | Yardeni Research

Perhaps it is better to hold the S&P500, despite being more overvalued (relatives to its own past average multiples) than the S&P600? Well, not so fast, because historically the small caps (and medium caps) grew faster than the large caps looking back over the 20th C.

Even over just the last 25 years, where we have seen dominant tech firms taking much of the market's earnings, small caps still outperformed the large caps in sales per share growth (a good proxy for real growth as the margin changes have upper and lower bounds so the start/end values distort the sense of underlying growth). The small caps grew faster over the last 25 years at a rate of (90/10 - for a CAGR of 9.2%) versus (290/50 - for a CAGR of 7.2%). Refer to figure 5:
yardeni.com - Largecaps vs smidcaps

By holding the S&P600 right now, through an ETF such as 'IJS' or 'IJR', you get a double whammy: (1) You are buying at a forward PE below its 25 year average, (2) the growth has historically been higher than the S&P500.

There is a lot of discussion in the media, YouTubers, and amongst forums, to diversify away from US stocks to international ETFS. However, if you want to hold an ETF that isn't overvalued, just avoid the large cap stocks. IJR (or IJS which I slightly prefer) will do fine (for which the data above matches).

- Manlobbi