Amid ongoing debate over whether US exceptionalism is making a comeback, Kerry Craig, global market strategist at JP Morgan Asset Management, said he sees market uncertainty as a chance to diversify into opportunities beyond the US.
Speaking at the Stockbrokers and Investment Advisers Association (SIAA) conference this week, Craig urged investors to maintain a neutral stance on the world’s largest economy, advocating for balance rather than a full exit.
“You’ve got a large overweight towards US stocks by many investors. I think what you’ve seen so far this year has not been this case of ‘sell America’, which everyone talks about … It’s been ‘rebalance America’, so you’ve seen big flows into other parts of the world,” he said.
“We would agree with that, we think it’s an opportune time to look at your portfolios. If you’ve had that strong and growing overweight towards the US, think about rebalancing that to a certain extent. We would be neutral on the US right now.”
Agreeing with Craig, Sebastian Mullins, head of multi-asset and fixed income at Schroders Australia, said current market conditions are acting as a catalyst for non-US opportunities within global equities.
“There is a good catalyst that could be occurring ex-US in global equities that we haven’t seen for a decade. It’s not the end of America, but it’s a chance to actually buy some other countries as they start to recover,” Mullins said at the SIAA conference.
“I think there is rebalancing going on and the premium [investors are] willing to pay for the US is under question.”
While it is critical for investors to diversify into equity markets beyond the US, both speakers emphasised this doesn’t mean dumping US exposure altogether.
“It’s not [about] sell America, it’s rebalance from America – that’s an important point to note because US equities still have the best earnings outlook, the best margins, they have monopolistic pricing power, they have the Magnificent 7, AI – you name it, they have,” Mullins said.
“They are superior companies compared to the rest of the world.”
Echoing this, Craig acknowledged that over the past decade, US equity markets have largely outperformed, which, he said, is evident in the significant growth of the S&P 500 compared to the MSCI ACWI ex-US index.
“Going back to 2007, the S&P 500 is up a little over 400 per cent. Compare that to the MSCI All Countries World ex-US, it’s up about 25 per cent over that same period,” he said.
“For a long time, the US did seem like the only game in town when it came to allocating towards global equities because you had companies that had really strong returns on equities, really good margins, they were in line with the secular themes around AI – just extremely profitable,” the global market strategist said.
While the US is broadly expected to keep outperforming over years to come, Craig still advised a neutral approach in the short-term as negotiations around tariffs continue.
“All those reasons why the US has outperformed in the last decade will still play through in the long run. So I think there’s a period here where you think about being a little bit more neutral to the US, but with that eye on in terms of picking out those relatively cheaper stocks now that you liked a year ago,” he said.
BlackRock, the global asset management powerhouse, which briefly shifted to an underweight position in US equities earlier this year, once again reaffirmed its conviction that US assets remain central to diversified global portfolios.
“We stay overweight US stocks on a six- to 12-month tactical horizon thanks to US corporate strength and mega forces – big structural shifts like AI that are driving an economic transformation on a par with the industrial revolution,” the asset manager said this week.
However, the firm warned that the unpredictable long-term impact of this economic transformation demands a flexible, multi-scenario approach to asset allocation.
“Economic transformation makes long-term portfolio construction more challenging. We now use a starting point scenario in our strategic views and formally track others. US assets are still core to portfolios, in our view,” it said.
