Fund manager says concern over U.S. tech giants is growing as investors look overseas
Julian McManus, a fund manager at Janus Henderson Investors, said in an interview that after years of heavy exposure to U.S. stocks, investors are now more willing to allocate to equities overseas. The concentration of holdings in the so-called “Magnificent Seven” U.S. technology companies has weakened portfolios’ ability to withstand risk, he said. Refinitiv data showed that the MSCI ACWI ex-USA Index had risen more than 8% year to date, compared with a 6.8% gain for the S&P 500, meaning overseas equity markets had outperformed the broader U.S. market. The source identifies New York as the location and July 24, 2026, as the date accompanying the report. McManus, who works on Janus Henderson’s Global Alpha Equity team, said capital was clearly beginning to move into markets outside the United States. He said investors were diversifying because of concerns about the dominance of the Magnificent Seven and reducing their reliance on U.S. holdings. Janus Henderson had about $480 billion in assets under management as of March 31; the source does not specify the year. The shift is a sharp contrast with the previous two years, the source said. Over the preceding decade, U.S. stocks had consistently outperformed global markets, and U.S. financial advisers had generally been reluctant to allocate to overseas assets. McManus said many investors were heavily concentrated in a small number of large-cap U.S. technology stocks. If those market leaders weakened, entire portfolios could come under significant pressure. “The seven giants account for almost half of the index, and everyone is crowded into the same holdings. If the trend reverses, investors will inevitably suffer heavy losses,” he said. McManus said he did not believe investors were engaged in a large-scale withdrawal from U.S. stocks. Rather, the recent strength of overseas markets was prompting them to reconsider how to allocate assets globally. “This is not a rush for the exits, and there are absolutely no signs of panic selling. People are simply willing to seriously discuss global diversification now,” he said. He added that despite rising geopolitical uncertainty, geopolitics had had a limited practical effect on capital allocation. “Policy hot spots come and go. Most financial advisers and investors are pragmatic. They invest wherever the returns are, and they are generally not overly influenced by political factors,” McManus said. McManus’s preferred regions, industries and companies include the following: - Japan: the Bank of Japan and life insurers. - China: Tencent and Contemporary Amperex Technology, also known as CATL. - Defense: the United Kingdom’s BAE Systems and Hyundai Rotem. - Health care: argenx, a biopharmaceutical company. - Technology and artificial intelligence: upstream semiconductor supply-chain companies rather than AI application companies. - India: McManus remains positive on India over the long term and is watching Reliance Industries, but the fund is currently underweight because of its high valuation. The source also lists NatWest in the recommendations section without specifying a category. McManus said he was particularly positive on European banks, Japanese financial companies, selected Chinese and South Korean stocks, and the defense and health-care sectors. European banks’ profitability has improved substantially while their valuations still have room to recover, he said. After decades of ultra-low interest rates, Japan has entered a rate-hiking cycle that is benefiting banks and insurers. Following an earlier sharp selloff, South Korea’s market is gradually showing allocation value. “The South Korean stock market has recently undergone a deep correction, and we believe many South Korean stocks now offer very attractive investment value,” McManus said. He singled out Samsung Electronics, saying the market had underestimated the long-term potential of its foundry business and that the value had not been fully reflected in the share price. McManus is also optimistic about China’s stock market. After years of depressed market sentiment, he said, many high-quality Chinese leaders had been unfairly sold off. Tencent and CATL were typical examples, with valuations that did not match their competitive strength in their industries. Although enthusiasm for AI is high, Janus Henderson is adhering strictly to valuation discipline and prioritizing upstream semiconductor suppliers instead of betting on AI application companies whose winners are difficult to predict. “AI development cannot happen without semiconductors,” McManus said. The firm uses a bottom-up stock-selection approach rather than making a concentrated bet on a single industry. Looking ahead, McManus said the market had underestimated the long-term investment returns from AI. He said returns on invested capital had hit a low and then risen sharply for several consecutive quarters, demonstrating that large cloud providers such as Google were already delivering real AI profits. The diversification trend extends beyond equities. Ian Horne, an investment director at Muzinich, said sharp volatility driven by Federal Reserve policy and economic data was making investors more inclined to adopt globally diversified portfolios and abandon aggressive short-term speculation. “Interest-rate volatility is becoming more frequent, which means everyone must be prepared for global diversification,” Horne said. Some investors remain bullish on U.S. stocks. Polka Mishra, chief financial adviser at Javelin Wealth, said many wealth-management firms continued to maintain heavy U.S. equity exposure because the U.S. economy remained resilient, inflationary pressure was easing and the AI industry continued to lead the world. “At this stage, U.S. stocks have the strongest resilience. The ‘exceptionalism’ of the U.S. market, which people have questioned repeatedly for years, continues to be validated by market performance,” Mishra said.
The concentration of holdings in the so-called “Magnificent Seven” U.S. technology companies has weakened portfolios’ ability to withstand risk, he said.
Refinitiv data showed that the MSCI ACWI ex-USA Index had risen more than 8% year to date, compared with a 6.8% gain for the S&P 500, meaning overseas equity markets had outperformed the broader U.S. market. The source identifies New York as the location and July 24, 2026, as the date accompanying the report.
McManus, who works on Janus Henderson’s Global Alpha Equity team, said capital was clearly beginning to move into markets outside the United States. He said investors were diversifying because of concerns about the dominance of the Magnificent Seven and reducing their reliance on U.S. holdings. Janus Henderson had about $480 billion in assets under management as of March 31; the source does not specify the year.
The shift is a sharp contrast with the previous two years, the source said. Over the preceding decade, U.S. stocks had consistently outperformed global markets, and U.S. financial advisers had generally been reluctant to allocate to overseas assets.
McManus said many investors were heavily concentrated in a small number of large-cap U.S. technology stocks. If those market leaders weakened, entire portfolios could come under significant pressure.
“The seven giants account for almost half of the index, and everyone is crowded into the same holdings. If the trend reverses, investors will inevitably suffer heavy losses,” he said.
McManus said he did not believe investors were engaged in a large-scale withdrawal from U.S. stocks. Rather, the recent strength of overseas markets was prompting them to reconsider how to allocate assets globally.
“This is not a rush for the exits, and there are absolutely no signs of panic selling. People are simply willing to seriously discuss global diversification now,” he said.
He added that despite rising geopolitical uncertainty, geopolitics had had a limited practical effect on capital allocation.
“Policy hot spots come and go. Most financial advisers and investors are pragmatic. They invest wherever the returns are, and they are generally not overly influenced by political factors,” McManus said.
McManus’s preferred regions, industries and companies include the following:
- Japan: the Bank of Japan and life insurers.
- China: Tencent and Contemporary Amperex Technology, also known as CATL.
- Defense: the United Kingdom’s BAE Systems and Hyundai Rotem.
- Health care: argenx, a biopharmaceutical company.
- Technology and artificial intelligence: upstream semiconductor supply-chain companies rather than AI application companies.
- India: McManus remains positive on India over the long term and is watching Reliance Industries, but the fund is currently underweight because of its high valuation.
The source also lists NatWest in the recommendations section without specifying a category.
McManus said he was particularly positive on European banks, Japanese financial companies, selected Chinese and South Korean stocks, and the defense and health-care sectors. European banks’ profitability has improved substantially while their valuations still have room to recover, he said. After decades of ultra-low interest rates, Japan has entered a rate-hiking cycle that is benefiting banks and insurers.
Following an earlier sharp selloff, South Korea’s market is gradually showing allocation value. “The South Korean stock market has recently undergone a deep correction, and we believe many South Korean stocks now offer very attractive investment value,” McManus said.
He singled out Samsung Electronics, saying the market had underestimated the long-term potential of its foundry business and that the value had not been fully reflected in the share price.
McManus is also optimistic about China’s stock market. After years of depressed market sentiment, he said, many high-quality Chinese leaders had been unfairly sold off. Tencent and CATL were typical examples, with valuations that did not match their competitive strength in their industries.
Although enthusiasm for AI is high, Janus Henderson is adhering strictly to valuation discipline and prioritizing upstream semiconductor suppliers instead of betting on AI application companies whose winners are difficult to predict.
“AI development cannot happen without semiconductors,” McManus said. The firm uses a bottom-up stock-selection approach rather than making a concentrated bet on a single industry.
Looking ahead, McManus said the market had underestimated the long-term investment returns from AI. He said returns on invested capital had hit a low and then risen sharply for several consecutive quarters, demonstrating that large cloud providers such as Google were already delivering real AI profits.
The diversification trend extends beyond equities. Ian Horne, an investment director at Muzinich, said sharp volatility driven by Federal Reserve policy and economic data was making investors more inclined to adopt globally diversified portfolios and abandon aggressive short-term speculation.
“Interest-rate volatility is becoming more frequent, which means everyone must be prepared for global diversification,” Horne said.
Some investors remain bullish on U.S. stocks. Polka Mishra, chief financial adviser at Javelin Wealth, said many wealth-management firms continued to maintain heavy U.S. equity exposure because the U.S. economy remained resilient, inflationary pressure was easing and the AI industry continued to lead the world.
“At this stage, U.S. stocks have the strongest resilience. The ‘exceptionalism’ of the U.S. market, which people have questioned repeatedly for years, continues to be validated by market performance,” Mishra said.