For a decade, American stocks consistently outperformed their international peers. This year, the advantage has flipped.
The reversal marks a notable change after a long stretch of U.S. dominance. With a handful of U.S. tech stocks accounting for much of the S&P 500's advance, investors who once ignored international markets are being forced to reconsider the risks of a concentrated portfolio.
Julian McManus, a portfolio manager on Janus Henderson Investors' Global Alpha Equity Team, sees greater openness among clients to own more foreign stocks. "There's definitely a move to explore more outside the U.S.," he told CNBC in an exclusive interview. "I wouldn't say it's like a stampede. It's by no means a panic. But at least people are more open to having that conversation."
Janus Henderson's assets under management totaled roughly $480 billion as of March 31.
"The Mag Seven is nearly half of your index, and you're all in," he said. "If that goes into reverse, you're going to have a problem."
He did not frame the move as a mass exit from U.S. assets, but said the latest global rally has led clients to reconsider their geographic mix.
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Politics have played only a limited role in asset allocation decisions, in McManus's view. "I think the political debate sort of comes and goes, but I think most advisers, most investors are fairly pragmatic and they'll go where they see the returns, and they tend to overlook the politics," he said.
His portfolio favorites include European lenders, Japanese financial firms, selected South Korean and Chinese names, plus defense and healthcare. European banks have become significantly more profitable and still have room for further re-rating, he said. Japanese banks and life insurers should gain now that interest rates are climbing after decades of ultra-low borrowing costs.
South Korea also looks compelling after the recent selloff. "Korea has definitely been through the wringer just recently," he said. "We do think that there's a lot of value in some of these Korean names." He called out Samsung Electronics, arguing that the market underestimates the long-term promise of its foundry operation.
He is also upbeat on Chinese stocks, saying several of the country's "national champions" had been "thrown out with the bathwater" after a prolonged period of poor sentiment. Tencent and CATL, he said, trade below what their competitive strength warrants.
His preferred holdings also include defense names BAE Systems and Hyundai Rotem, healthcare stock Argenx, U.K. companies AstraZeneca and NatWest, and Canadian producers Canadian Natural Resources and Teck Resources. He is positive long-term on India but currently underweight Reliance Industries on valuation grounds.
On AI, McManus said the firm keeps its valuation discipline and prefers semiconductor suppliers to trying to name the eventual AI winners. "We can't have AI without semis," he said, adding that the firm relies on bottom-up stock picking instead of making large sector bets.
In his view, the market is too pessimistic about how much AI spending will eventually earn. "If you look at Google's quarterly return on invested capital... those bottomed three quarters ago, and since then they've been ramping steeply, which shows that the returns are there for the Googles and the hyperscalers," he said.
"We're seeing more and more volatility in rates," Ian Horne, investment director at Muzinich & Co., said. "It probably means you want to be a bit more diversified globally."
According to Javelin Wealth Management's chief wealth adviser, Polka Mishra: "The most attractive market at this point is the most resilient, and it has continued to show the exceptionalism that we've all continued to question for a few years now."
McManus's stock picks show that international exposure is not simply a bet against the U.S. Rather, it is a search for individual companies whose earnings power is not reflected in their share prices. With the S&P 500 heavily dependent on a few technology names, global diversification offers a way to reduce the impact of a single sector's reversal.
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