By Iain Withers
LONDON (Reuters) – U.S. stocks look set to extend their outperformance this year boosted by the financial firepower of big tech companies and investor-friendly policies under Donald Trump's second presidency, a bank said State Street CEO asset management on Wednesday.
Some investors believe Trump's agenda of tax cuts and deregulation may further boost US exceptionalism – which saw US stocks widen their valuation gap over rivals last year – despite potential disruption from policies such as higher tariffs and concerns that the market in bubble territory.
Big tech companies that have outperformed US stock indexes can continue to do so because of their large investment budgets, Yie-Hsin Hung, CEO of State Street Global Advisors (SSGA), one of the world's largest asset managers with $4.7 trillion under management , at a media event in London.
“You have the advent of all these new technologies whether it's AI, quantum computing… The earnings adjustments they've made as a result of it suggest that that level of exceptionality has a good chance of continuing,” Hung said. .
SSGA, known for its passive, index-tracking funds, believes Trump's policies will be “generally constructive” for investors but is preparing for “a fair amount of volatility”, it added.
Hung was speaking at an event to launch the SSGA exchange-traded fund (ETF) which offers European investors access to Saudi government bonds and which will be partially listed on the London Stock Exchange.
State Street said Saudi Arabia's sovereign wealth Public Investment Fund would invest $200 million in the ETF.
Saudi Arabia has attracted considerable interest from foreign investors seeking to take advantage of the kingdom's drive to diversify its economy away from oil but the country's human rights record has long been the subject of criticism.
Hung said SSGA engaged with clients on environmental, social and governance issues, but ultimately they were what they invested in. “We subscribe to the idea of providing choice to our clients,” he said.
Saudi Arabia denies accusations of human rights abuses and says it protects its national security through its laws.
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(Reporting by Iain Withers; Editing by Tommy Reggiori Wilkes, Kirsten Donovan)