Second half Risk On! The world's largest asset management still favors US stocks over European stocks

The world's largest asset management company BlackRock is optimistic about the outlook for U.S. stocks, stating that AI will drive profits beyond Europe.

On Wednesday, BlackRock stated at its second-half investment outlook briefing that despite significant market uncertainties, the "American exceptionalism" is far from over, and thanks to strong profit growth driven by artificial intelligence (AI), U.S. stocks remain the best investment choice, expected to surpass European stock markets again. Chief Strategist Li Wei stated:

From a macro perspective, we still hold a 'risk-on' stance.

Specific forecast data shows that BlackRock expects U.S. corporate profits to grow by 6% year-on-year in the second quarter, while Europe is only expected to grow by 2%. This continues the divergence trend from the first quarter, when U.S. corporate profit growth reached 14%, far exceeding Europe's 2%. The new round of U.S. earnings season will kick off this month. Michael Pyle, Deputy Head of BlackRock's Portfolio Management Group, stated:

The potential strength, vitality, and innovation potential of the U.S. corporate sector and U.S. stock market remain unparalleled.

BlackRock suggests that in the context of inflation concerns and increasing debt burdens, U.S. stocks are more attractive than U.S. bonds. So far this year, the S&P 500 index has consistently underperformed the pan-European STOXX 600 index, benefiting from the S&P closing at a new high on Wednesday, with the S&P's year-to-date increase approaching the 5.98% increase of the pan-European STOXX 600 index.

U.S. Bonds Less Attractive than U.S. Stocks

In the fixed income sector, BlackRock holds a cautious attitude towards U.S. Treasury bonds, believing they are less attractive than U.S. stocks, and suggests that U.S. investors look towards Europe.

Li Wei stated that on one hand, the trade war initiated by Trump may drive up inflation, and investors' expectations for the Federal Reserve to cut interest rates are overly optimistic, making U.S. bonds less attractive than U.S. stocks.

On the other hand, the tax legislation currently being discussed in the U.S. Congress may exacerbate the already high debt burden in the U.S., putting greater pressure on long-term bonds. This reduces the reliability of U.S. bonds as a portfolio hedging tool.

Li Wei recommends that U.S. investors consider European bonds with currency hedging, which can provide higher yields than the domestic market.

Risk Warning and Disclaimer

The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investing based on this is at one's own risk