by Omar El Chmouri and Sagarika Jaisinghani
US equities won’t remain unpopular for long given the robust outlook for economic growth and corporate earnings, according to some of Wall Street’s top strategists.
After years of outperformance, the benchmark S&P 500 Index is trailing international peers in 2025 as investors are put off by uncertainty from US President Donald Trump’s policies on tariffs and immigration as well as lofty valuations. Chinese chatbot startup DeepSeek has also fanned worries the US will lose its place as a pioneer in artificial intelligence.
Morgan Stanley strategist Michael Wilson — a bearish voice on US stocks until mid-2024 — said he expects capital to return to US stocks, calling the S&P 500 the “the highest quality index” with “the best earnings growth prospects.”
“It’s premature to conclude the rotation away from the US is sustainable,” Wilson wrote in a note.
Stocks of technology behemoths — the Magnificent Seven — have drawn the most skepticism from investors, who worry they’ve become too expensive after driving Wall Street’s rally since a low in late-2022. The cohort’s earnings growth is also set to slow after a peak in 2023. The tech-heavy Nasdaq 100 sank 2.1% Friday.
The S&P 500 has advanced only about 2% this year, while the Stoxx Europe 600 Index has surged 9% and the Nasdaq Golden Dragon China Index is up 18%. The Bloomberg Magnificent Seven Index, by contrast, has fallen 1.9%.
JPMorgan Chase & Co. strategist Mislav Matejka said a more subdued outlook for big tech was indeed a “meaningful impediment” for a renewed US outperformance more broadly.
However, US earnings growth would need to undershoot the rest of the world to support an outright bearish view, he added.
“We do not advocate an underweight US position as we see a still wide growth and earnings differential versus the rest, with tariffs escalation a wild card,” Matejka wrote in a note.
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