After years of outperformance, the U.S. underperformed other regions during the first quarter. While the debate over whether U.S. exceptionalism can persist continues, the U.S. has resumed its leadership since mid-April—led by the technology sector.
The first quarter of the year gave many investors pause about U.S. exceptionalism as other regions outperformed the U.S. stock market, despite higher domestic productivity, greater innovation, and the U.S.’ comparatively attractive employment demographics. While the debate over where to invest ensues, the U.S. has resumed its outperformance since mid-April.
In fact, since the S&P 500’s year-to-date low on April 8, the index has advanced 26%, which surpasses the rest of the world by 4.5%. The technology sector has breathed new life into U.S. leadership, with the Magnificent 7 companies up 38% since April 8 and the information technology sector up a significant 45%.
The new One Big Beautiful Bill Act permits the full expensing of capital expenditures for businesses, as well as write-offs of qualifying research and development expenditures within the first year. Looking ahead, we expect these provisions to increase capital investments and further expand the adoption of artificial intelligence, leading to continued tech-led U.S. strategic outperformance. As a result, we reiterate our positive view on U.S. large cap equities.
