Fund giants put faith in 'Trump Put' to keep stock rally rolling

by Richard Henderson

A cohort of the world’s largest asset managers is leaning harder into the rally in risk assets as US stocks push to fresh highs, defying persistent trade and geopolitical tensions.

Firms such as Invesco Ltd., Fidelity International Ltd. and JPMorgan Asset Management are reinforcing bullish bets across technology shares from the US to Asia as well as on emerging-market assets. The high-octane wager is that while President Donald Trump is threatening to disrupt the economic order anew, he will step back from the brink.

That’s helping justify risk exposure at a time when valuations are stretched and macro headwinds persist. In a market that rewards conviction and punishes caution, sitting out is starting to look like the riskiest position of all.

“People have really bought into this belief that there is a Trump put, that if markets correct or if US interest rates go up, Trump will back off as he did in April: that trade is on,” said Chang Hwan Sung, a multi-asset portfolio manager in Invesco’s investment solutions team in Hong Kong. “As we navigate through this uncertainty, we are very likely to become more pro-risk.”

This shared conviction isn’t just a general sense of optimism, it’s a calculated bet that the inherent volatility of a second Trump term will ultimately yield to economic pragmatism. For these global fund managers, that translates directly into a still-resilient outlook for international trade and supply chains, powering everything from Indonesian local-currency bonds and South Korean chipmakers to US growth stocks.

Invesco has boosted its US equity allocation ahead of second-quarter corporate earnings, which it anticipates will provide further support for stocks, Chang said.

And while the asset manager is overweight US stocks, it sees even better prospects elsewhere. “From what I see happening across the globe, we are very likely to be a bit more tilted towards non-US markets such as Europe and emerging markets,” Chang said.

Invesco sees medium-term opportunities in Korea due to optimism over the government’s corporate-governance reforms. The nation’s benchmark Kospi index has already gained more than 30% this year, making it one of the world’s best-performing major equity gauges.

Invesco is also adding to holdings of local currency emerging-market bonds in its cross-asset portfolios as it sees these deriving the most gain from expected US interest-rate cuts, Chang said. “For fixed income, we like high yielders like Indonesia and other high interest-rate countries because they will probably benefit the most,” he said.

Fidelity favors shares in Taiwan due to the island’s high concentration of technology firms, while it likes Korean stocks for their inexpensive valuations.

“Taiwan is probably one of the best value ways to play the tech cycle upswing, and we see a good case for being overweight,” said Ian Samson, a multi-asset fund manager at the money manager in Singapore. “If you look at GPU exports from Taiwan, they’re just off the charts, it’s incredible,” he said, referring to graphics processing units, a type of chip used to process digital images.

Fidelity isn’t universally positive on risk assets. The firm’s cross-asset portfolios are turning bearish on investment-grade and high-yield US corporate bonds due to their low differential to Treasury yields and are buying gold as a hedge, Samson said. 

AI Tailwind

JPMorgan Asset says medium-sized US tech stocks still have room to gain due to the market’s optimism over artificial intelligence.

The tailwinds of AI demand will offer further support for mid-cap tech stocks in the US, said Kerry Craig, an investment strategist at the company in Melbourne. “That adoption of AI across the broader US and global economy still has room to run,” he said.

Fidelity, Invesco and JPMorgan Asset aren’t alone in recommending overweight holdings of US equities. Goldman Sachs Group Inc. this month increased its target for the S&P 500 Index, while HSBC Holdings Plc has recommended higher US stock allocations in its multi-asset portfolios.

“We are really leaning back into US equities,” said Max Kettner, multi-asset strategist at HSBC in London. Corporate profit reports will provide a catalyst for US stocks, given low expectations, he said.

“People are probably overestimating the negative impact of tariffs on margins and earnings and they’re underestimating the positive tailwind from the weaker dollar,” Kettner said.

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