Aberdeen, BlackRock make case for US assets on tax cuts, earnings power
US assets will remain a key allocation for global money managers like Aberdeen Investments and BlackRock even as investors seek portfolio diversification by loading up on defensive sectors in Europe, China and Japan amid tariff and inflation challenges, strategists said.
Tax incentives handed out by the US government could drive corporate earnings to another level, particularly among smaller companies. Tech companies have also stepped up hiring talent to overcome challenges from China in the global race for leadership in artificial intelligence, they added.
The US House of Representatives passed the One Big Beautiful Bill on July 3, and it was headed to President Donald Trump for sign-off. The legislation provides substantial tax cuts and slashes several social safety-net programmes, helping the S&P 500 hit a record high this week.
Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.
“The profitability of listed companies in the [US] market is still good,” said Zhang Dongyue, Asia-Pacific head of multi-asset and investment solutions specialists at Aberdeen. “Although the market has fluctuated greatly this year, some industries including consumer goods, medical care, energy, and recently technology have recovered.”
He also cautioned investors not to bet against the US dollar despite its recent weakness.
The S&P 500 handed investors 6.8 per cent returns this year en route its record on July 3, according to Bloomberg data, while global stocks gained 10.2 per cent. This year, the US dollar has lost 10.6 per cent against its major peers, according to the DXY Index, as investors trimmed dollar-based assets. The S&P 500 rose 5.3 per cent during Trump’s first presidential term.
BlackRock, the world’s largest fund manager with US$11.6 trillion of assets, also considers US assets as core to its portfolios, but with greater selectivity given recent bouts of geopolitical and trade tensions.
“We are tactically overweight US equities, backed by strong earnings and AI strength,” said Alister Hibbert, chief investment officer and head of BlackRock’s strategic equity team, in a report on Wednesday. “We’ve seen volatility in markets – but not in US earnings. That consistency still counts.”
While investors have been switching out of dollar-based assets to diversify, the US currency could rebound in the short term on cyclical factors, such as the US fiscal bill and risk aversion arising from trade frictions, Zhang added. The dollar’s dominance has persisted through shifts in the global financial system, BlackRock said.
“We believe that the US dollar will face greater pressure in the short term, but from an investment perspective, we don’t mind,” Zhang said. “We do not recommend investors to short the US dollar now, as the US dollar is already oversold in the short term.”
Tariff uncertainty, global supply-chain reconfiguration and inflation are factors to watch out for in the second half of the year, according to Aberdeen.
“We believe that there will be continued competition and friction between China and the US in the export of some very core raw materials to reduce the dependence between the two sides further,” Zhang added.
In Europe, Aberdeen favours industrial stocks such as Siemens, as well as military, defence and financial stocks. They stand to benefit from two major fiscal stimulus plans: the European Union’s Euro800 billion (US$942 billion) defence spending by 2030 and Germany’s Euro500 billion infrastructure fund.
In emerging markets, Zhang highlighted Chinese stocks listed on the mainland bourses and in Hong Kong, particularly in the tech and AI sectors, as their cheaper valuations appeal to investors. Beijing has plenty of room to ease policies and spur stock markets, Zhang said.
With China’s real estate sector stabilising, government policy stimulus and investors diversifying from US assets, “the market’s attention to Chinese stocks will continue to increase”, he added.
More Articles from SCMP
China blocks EU companies from medical device contracts in tit-for-tat move
Hong Kong needs to better understand and balance ‘one country, two systems’
Why Chinese investors can still expect a warm welcome in many American cities
China’s Li, Brazil’s Lula pledge joint effort to bring AI to farming in both of their countries
This article originally appeared on the South China Morning Post (www.scmp.com), the leading news media reporting on China and Asia.
Copyright (c) 2025. South China Morning Post Publishers Ltd. All rights reserved.