Investors are increasingly considering international equities as concerns mount over the heavy concentration of U.S. portfolios in the so-called 'Magnificent Seven' technology giants, according to Julian McManus, portfolio manager at Janus Henderson Investors [1]. McManus noted that the dominance of these large-cap U.S. tech stocks has left many portfolios vulnerable, especially if leadership in these names were to reverse [1].
Recent performance data supports this shift: the MSCI ACWI ex-US index has risen more than 8% year-to-date, outpacing the S&P 500's 6.8% gain, according to LSEG data [1]. This marks a notable change from two years ago, when U.S. financial advisers were more hesitant to consider overseas markets after a decade of American stock outperformance [1].
McManus emphasized that while the move is not a 'stampede' or a 'panic,' investors are now more open to discussing global diversification [1]. He also stated that political factors have played only a limited role in these asset allocation decisions, with most investors prioritizing returns over geopolitical uncertainty [1].
In terms of favored sectors and stocks, McManus highlighted European and Japanese banks, Japanese life insurers, South Korea's Samsung Electronics, China's Tencent and CATL, defense companies like BAE Systems and Hyundai Rotem, healthcare firms such as Argenx, U.K.'s AstraZeneca and NatWest, Canadian Natural Resources and Teck Resources in Canada, and semiconductor suppliers in the technology/AI space. He also expressed a positive long-term view on India, mentioning Reliance Industries but noted the firm is currently underweight in that stock [1].
CONCLUSION
The growing willingness among investors to diversify internationally reflects concerns about overexposure to a handful of U.S. tech giants and recent outperformance by overseas markets. While not a wholesale shift, the trend suggests a more pragmatic, return-driven approach to global asset allocation. Key sectors and companies outside the U.S. are gaining attention as investors seek broader opportunities.