BlackRock warns of low thematic growth exposure in U.S. portfolios

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BlackRock warns of low thematic growth exposure in U.S. portfolios
Credit: © Reuters.

NEW YORK - BlackRock (NYSE: BLK ), the world's largest asset manager, has issued a warning to investors regarding the perceived adequacy of their thematic growth exposure through major technology stocks. Jay Jacobs, a senior executive at BlackRock, highlighted that many U.S. wealth investors might be underestimating their portfolios' actual exposure to transformative themes like artificial intelligence (AI), medical innovation, and the changing landscape of globalization.

According to BlackRock's 2024 Thematic Outlook Report, most investments in AI come from the large-cap tech firms known as the "Magnificent Seven," which includes Microsoft (NASDAQ: MSFT ), Amazon (NASDAQ: AMZN ), Meta Platforms (NASDAQ: META ), Apple (NASDAQ: AAPL ), Alphabet (NASDAQ: GOOGL ), Nvidia (NASDAQ: NVDA ), and Tesla (NASDAQ: TSLA ). However, the report underscores that no theme has more than 1.5% pure-play exposure, suggesting that investors relying solely on these megacap stocks may not have significant investment in these key areas.

To better capture the next wave of growth in AI, Jacobs recommends diversifying into specific exchange-traded funds (ETFs). The iShares Semiconductor ETF (NASDAQ: SOXX) and the iShares Robotics and Artificial Intelligence Multisector ETF (NYSEARCA: IRBO) are noted for their potential to tap into AI advancements. Jacobs predicts that significant growth opportunities will arise within small and mid-cap companies in this space. Additionally, the iShares Cybersecurity and Tech ETF (NYSEARCA: IHAK) is identified as being closely tied to the AI theme.

In terms of globalization trends, Jacobs points out that Mexico has recently surpassed China and Canada to become the largest trade partner with the United States. To capitalize on this shift, he suggests considering investments in the iShares MSCI Mexico ETF (NYSEARCA: EWW) and the iShares MSCI India ETF (NYSEARCA: INDA).

The medical innovation sector is also undergoing significant changes due to demographic shifts in the U.S., with the population hitting "peak 65" and experiencing what BlackRock calls a 'Historical Reversal'. To engage with this theme, BlackRock has identified several funds including the BlackRock Future Health ETF (BMED), iShares Biotechnology ETF (NASDAQ: IBB), and iShares Neuroscience and Healthcare ETF (NASDAQ: IBRN).

Investors are being urged to reassess their portfolios to ensure they are not overlooking opportunities for thematic growth beyond the dominant tech giants. By considering a broader range of targeted ETFs, they may be able to achieve a more robust exposure to these burgeoning sectors.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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