Investors Shift Toward International Equities Amid Concerns Over Magnificent Seven Dominance
Portfolio manager Julian McManus from Janus Henderson Investors noted a growing openness among investors to international equities as concerns over the dominance of U.S. tech giants, known as the 'Magnificent Seven,' increase. The MSCI ACWI ex-US index has outperformed the S&P 500 year-to-date by more than 8% compared to the latter's gain of 6.8%, according to LSEG data. McManus highlighted that portfolios have become overly concentrated in a few large-cap U.S. tech stocks, making them vulnerable if those companies falter. He emphasized European banks, Japanese financials, and selected South Korean and Chinese firms as areas with strong potential due to improved profitability or undervaluation following recent selloffs. He also pointed out that political factors have had limited impact on asset allocation decisions despite geopolitical uncertainty, noting investors tend to prioritize returns over politics. McManus favors defense stocks like BAE Systems, healthcare companies such as Argenx and AstraZeneca, and energy firms including Canadian Natural Resources.
Topics: international equities Magnificent Seven MSCI ACWI ex-US index portfolio diversification