BlackRock is bullish on US stocks over European stocks: The "American exceptionalism" driven by AI still leads the way

According to the Zhitong Finance APP, BlackRock Investment Research Institute pointed out that despite significant market uncertainties, U.S. stocks remain the best allocation in the current "risk appetite" environment, and investors should not prematurely dismiss the "American exceptionalism." The strategy team of the world's largest asset management company stated at the 2025 second-half investment outlook conference on Wednesday that U.S. companies will achieve stronger profit growth through the application and investment in artificial intelligence (AI), and the underperformance of U.S. stocks relative to European stocks this year is unlikely to continue.

"Overall, we are still in a risk appetite state, despite the high level of uncertainty," said Wei Li, BlackRock's Global Chief Investment Strategist, at the conference. This view contrasts with some investors who, due to Donald Trump's trade and fiscal policies stirring the financial markets earlier this year and shaking confidence in the world's largest economy, previously called for reducing U.S. stock holdings for diversification.

The S&P 500 index has returned over 5% this year but still lags behind the nearly 7% increase of the Stoxx Europe 600 index, which has benefited from market expectations of more fiscal stimulus in Europe. In dollar terms, the European index has a year-to-date return of about 22%. This market dynamic has reversed the trend of the past few years, where the U.S. stock benchmark index significantly outperformed other developed markets, mainly due to the soaring stock prices of U.S. tech giants.

BlackRock expects U.S. corporate earnings to grow by 6% year-on-year in the second quarter, while Europe is around 2%. According to their team's data, U.S. corporate earnings growth in the first quarter reached 14%, far exceeding Europe's 2%. The next U.S. earnings reporting season will start this month. "Overall, the underlying resilience, vitality, and innovation potential of the U.S. stock market remain unmatched," said Michael Pyle, Deputy Head of BlackRock's Portfolio Management Team.

Wei Li added that the attractiveness of U.S. Treasuries is lower than that of U.S. stocks, as Trump's trade policies may push up inflation—meaning investors' expectations for the Federal Reserve to cut interest rates are overly optimistic. Additionally, she pointed out that the tax reform bill currently being debated in Congress could exacerbate the already high debt burden in the U.S., putting greater pressure on long-term U.S. Treasuries, which reduces their reliability as a hedging tool in investment portfolios.

Li suggested that U.S. investors consider allocating European bonds after hedging currency risks, as this strategy can provide yields higher than the domestic market