Peter Bates, portfolio manager of the Global Select Equity Strategy at T. Rowe Price, said he remains “most bullish” on US stocks despite challenges threatening US exceptionalism.
“The US stock market undeniably stands out due to its free market structure, liquidity, robust financial regulations and transparency. Coupled with a strong education and judicial system, these foundations protect innovation – allowing great ideas to be patented and turned into thriving businesses,” the portfolio manager said.
According to Bates, these advantages remain intact, defying recent political shifts, including US President Donald Trump’s sweeping tariffs announced on 2 April, dubbed “Liberation Day”.
“While short-term valuation premiums may fluctuate, there is little structural evidence that other developed economies will outpace the US over the next several years,” Bates said, adding that the country’s foundational pillars will sustain attractive opportunities over the long-term.
The portfolio manager also encouraged greater separation of politics from the economy, recognising that developed markets are performing well across the board.
“Banks are healthy with excess capital, credit conditions are stable, and most regions have near full employment supporting strong consumer spending,” he said.
“About 90 per cent of the S&P 500 reported Q1 earnings, showing average revenue and EPS growth of 5 per cent and 14 per cent, well above consensus estimates of 7 per cent EPS growth,” he added, referencing data from Bloomberg Finance LP.
While he acknowledged that political decisions such as tariffs and taxes do impact the economy over time, Bates expects developed economies overall to remain resilient in the face of these headwinds.
He continued: “Major market crises typically stem from financial instability, which we do not currently see.”
The portfolio manager’s optimistic views on the US contrast other perspectives seen at the asset manager.
Earlier this month, Sam Ruiz, global equity portfolio specialist at T. Rowe Price, confirmed the Growth Equity Strategy had been trimming its US equity and mega-cap tech exposure in response to shifting market dynamics and rising uncertainty.
Already underweight US equities, the T. Rowe Price strategy is now leaning towards Europe and select emerging markets to capture growth.
In its separate Global Asset Allocation: The View from Australia report released last week, Thomas Poullaouec, head of multi-asset solutions APAC at T. Rowe Price, and his team said they had reduced exposure to risk assets, reflecting a cautious stance on global growth and inflation challenges.
To align with the firm’s view on moderating risk, T. Rowe Price lowered its equity allocation to an underweight from neutral while adding to cash (shifting to neutral) due to potential headwinds to growth from tariff and trade policies, the team said.
Within equities, they stated they continue to value-oriented sectors, supported by reasonable valuations and a shift away from US large-cap growth. Meanwhile, opportunities outside the US are seen as more attractive due to compelling valuations and supportive fiscal and monetary conditions.
