US interest cooling, but these shares are attracting the pros

US equities have been a staple of global portfolios for several years thanks to their exceptional growth over the past decade. But market-rattling events such as the release of Chinese start-up DeepSeek’s AI chatbot in January and President Donald Trump’s escalating tariff policy have given US investors pause for thought.

Some investors have been ditching US stocks in favour of markets with better growth prospects. According to Bank of America’s latest Global Fund Manager Survey, institutional investors are underweight US stocks and the dollar.

• Invest with ii: Trade US Stocks & Shares | US Earnings Season | Open a Trading Account

Retail investors’ interest is also cooling, with figures for May from fund trade body the Investment Association (IA) showing that they pulled money out of US funds for the first time in six months. Investors withdrew £622 million, including a record £303 million from funds investing in smaller US companies, reversing April’s £962 million of inflows.

Focusing on value 

However, the US constitutes a large part of the equity market and managers with a global investment remit are unlikely to completely ignore the US in a diversified portfolio, so where are they finding opportunities?

Sotirios Nakos from Aviva’s multi-asset team has been tactically increasing the portfolio’s US exposure, albeit from a low base.

“Tactically, we were quite cautious going into the announcements around tariffs, so in that sense, we were slightly underweight. But after the event, we took the opportunity to reduce that excessive pessimism and move slightly overweight US equities,” he explains.

Nakos expects US growth to slow down to half of where it was last year, but remain in positive territory, with nominal GDP of around 4.5%. He adds that certain companies will still be able to translate this into strong earnings, a key theme for his strategy.

“Companies able to deliver strong earnings in an environment of slower US growth and global uncertainty will be rewarded by a market premium, relative to other equities,” he says. “Obviously, there is the other side, which is valuations, but as long as there’s enough visibility on this, earnings will deliver. At times when there is below-trend growth in the US, we expect companies with strong earnings to fare better.”

• Why dollar collapse is opportunity for UK investors
• Is US stock market exceptionalism over?

Despite US stocks trading at a discount during the market sell-offs this year, global managers haven’t generally been looking to increase their US exposure, instead preferring to rotate into other US companies they find more compelling, while trying to benefit from potential growth rates in other regions.

Dominic Byrne, head of global equities at AXA Investment Managers, explains: “The US trades at a significant premium to the rest of the world, which was justified given the higher, more stable growth in the US market. But with growth rates converging, we thought there would be pressure on the US market.”

Byrne and his team adopt a bottom-up approach and don’t take big bets at a country or sector level. Overall, though, exposure to the US for its global sustainable fund is underweight, which he says has increased throughout the year and is now around 5%.

“US markets have been exceptionally strong, driven by the Magnificent Seven stocks, but looking forward we saw the differential in growth rates reducing.”

Byrne says the strategy’s US exposure broadly sits across three buckets: financials, industrials and technology. In financials, Byrne names JPMorgan Chase & Co (NYSE:JPM), Morgan Stanley (NYSE:MS), Visa Inc Class A (NYSE:V), American Express Co (NYSE:AXP), and S&P Global Inc (NYSE:SPGI) as holdings.

“JP Morgan and Morgan Stanley have exposure to the real economy in the US, but they also have exposure to the financial markets. With deregulation coming through within financial services and corporate activity picking up, they are good ways of getting exposure to the strength of the underlying US economy.”

• Top 20 best-performing funds and sectors so far in 2025
• How did one-stop shop funds fare amid tariff turmoil?

The fund’s industrials exposure is wide-ranging across sub-sectors, including transport company Uber Technologies Inc (NYSE:UBER) and construction supplier Carlisle Companies Inc (NYSE:CSL).

“We continue to see good growth for Uber. Their position as global leader will continue to be strengthened,” he says.

“Carlisle Companies – a relatively recent addition – is one of the leading providers of commercial roofing in the US. They’ve been taking market share, consolidating the market and improving margins. It’s been a great success story and we see many more years of growth.”

In the technology bucket, the fund’s exposure is split between data centres and companies that are benefiting from artificial intelligence (AI) and improved productivity.

“NVIDIA Corp (NASDAQ:NVDA) is one of the biggest positions in the portfolio, which has performed very well, given their leading position in supplying semiconductors for AI models. On the other side, we own two businesses, ServiceNow Inc (NYSE:NOW) and Intuit Inc (NASDAQ:INTU).

“Intuit is a growing tax and accounting software business and ServiceNow provides software for workflow management and a digital productivity tool. We think they’re in the best place to drive significant gains from rolling out AI-enabled products.”

Tech opportunities?

Tech stocks have long been the darlings of portfolios and have dominated US equity markets. For tech-savvy managers, the market dips were the perfect opportunity to top up holdings and buy into companies on their watchlists.

Caroline Shaw, portfolio manager on the Fidelity Multi Asset Open Range, highlighted tech as “one of the best areas in US equities at the moment” thanks to its “strong fundamentals”.

“We began the year underweight the sector due to what we felt were excessive valuations. Although valuations are still not particularly cheap, the recent shake-out caused by tariffs and the reappraisal of US exceptionalism has created opportunities,” she says.

“Compared to other US sectors, US IT has the highest earnings revision ratio, the best earnings per share (EPS) growth outlook, the highest margins, and the best return on capital.”

• What I’d do with Netflix and Tesla stock now
• The big, not-entirely-beautiful impact of the new US tax and spending law

Jessica Henry, Hermes’ investment director for sustainable equity, is also fairly bullish on US AI stocks.

“Although we feel optimistic about US equities, uncertainty remains,” she says. “We’ve still got concerns around trade, inflation, geopolitics, and fiscal vulnerabilities, such as the US budget.”

Henry says the fund managers used the market dips to top up holdings in companies they have a high conviction in and buy into companies on the watchlist, on the view that sentiment has been driving markets, rather than a significant change to companies’ intrinsic value.

“The fundamentals of some of the big tech names reasserted themselves in the Q1 earnings season, with Microsoft Corp (NASDAQ:MSFT) showing strong figures on their cloud business, for example, and several of the Magnificent Seven beating analysts’ expectations,” she says.

• Watch out: tech trends and overlooked UK stocks
• Sign up to our free newsletter for investment ideas, latest news and award-winning analysis

Janus Henderson’s Ben Lofthouse, head of global equity income and manager of the Janus Henderson Global Equity Income fund, has been making some switches in the strategy’s technology exposure, selling out of data storage company Seagate Technology Holdings (NASDAQ:STX) at the start of the year and buying into Google’s parent company Alphabet Inc Class A (NASDAQ:GOOGL), currently a 2% position.

“Alphabet is trading on one of the lower valuations it’s traded on for the last few years. The market is undecided whether it’s a beneficiary of AI, but it has a strong balance sheet and it has been investing heavily in other businesses, such as Google’s self-driving car project Waymo and AI research lab DeepMind. Alphabet clearly has some legislative issues but that’s why it’s cheap.”

Outside the tech sector, Lofthouse also bought into multinational energy company Chevron Corp (NYSE:CVX) at the start of the year.

“Chevron has more discipline around capital expenditure than they’ve had in previous years and is taking advantage of the lower oil price to buy Hess Corp (NYSE:HES), another energy company. We were very underweight oil, so we took the opportunity to initiate positions where there is strong cash generation.”