Investors Look Overseas as Magnificent Seven Concerns Grow. Janus Henderson Sees Opportunities in Europe and Asia

Investors are increasingly looking beyond the U.S. stock market as concerns mount over the heavy concentration of the "Magnificent Seven" technology giants in major indexes, according to Janus Henderson Investors portfolio manager Julian McManus.

In an interview with CNBC, McManus said the recent outperformance of international markets is encouraging financial advisers and investors to reconsider their global allocations after years of favoring U.S. equities.

While he stopped short of calling it a mass exodus from American stocks, he said attitudes toward overseas investments have shifted noticeably. "There's definitely a move to explore more outside the U.S.," McManus told the outlet, pointing to growing concerns that portfolios have become too dependent on a small group of mega-cap technology companies.

The comments come as global markets show signs of broader leadership. According to LSEG data cited by CNBC, the MSCI ACWI ex-US Index has gained more than 8% so far this year, outperforming the S&P 500, which has risen about 6.8%.

McManus said investors have become increasingly exposed to the Magnificent Seven, the group of dominant U.S. technology companies that has driven much of the stock market's gains in recent years. The list includes Nvidia, Apple, Meta, Tesla, Amazon, Alphabet, and Microsoft.

"The Mag Seven is nearly half of your index, and you're all in," he said. "If that goes into reverse, you're going to have a problem." Rather than abandoning U.S. assets altogether, McManus described the current environment as one where investors are becoming more receptive to diversification.

"I wouldn't say it's like a stampede. It's by no means a panic," he said. "But at least people are more open to having that conversation." Political uncertainty, meanwhile, has played a relatively minor role in allocation decisions, he said. Investors, in his view, remain focused on returns rather than geopolitics.

"I think the political debate sort of comes and goes, but I think most advisers, most investors are fairly pragmatic and they'll go where they see the returns, and they tend to overlook the politics," McManus said.

Among the international opportunities Janus Henderson currently favors are European banks, Japanese banks and life insurers, as well as select companies in South Korea and China.

McManus argued that European banks have become significantly more profitable while still offering attractive valuations. In Japan, he sees banks and insurance companies benefiting from higher interest rates after decades of ultra-low borrowing costs.

South Korea has also emerged as an attractive market following recent weakness. McManus highlighted Samsung Electronics as a company whose long-term growth prospects are not fully reflected in its share price, particularly its foundry business. "Korea has definitely been through the wringer just recently," he said. "We do think that there's a lot of value in some of these Korean names."

He also expressed optimism about selected Chinese companies despite years of investor skepticism toward the country's equity market. Manus described firms such as Tencent and battery giant CATL as "national champions" whose competitive advantages are not adequately reflected in current valuations.

Beyond regional opportunities, Janus Henderson is bullish on several sectors, including defense and healthcare. Among the firm's preferred companies are BAE Systems and Hyundai Rotem in defense, Argenx in healthcare, AstraZeneca and NatWest in the United Kingdom, and Canadian Natural Resources and Teck Resources in Canada.

Artificial intelligence also remains a long-term investment theme, though McManus said the firm is taking a disciplined approach by favoring semiconductor suppliers instead of companies developing AI applications.

"We can't have AI without semis," he said, explaining that the firm's investment strategy focuses on identifying companies with attractive valuations rather than chasing the latest AI winners.

Not everyone believes investors should reduce their exposure to U.S. equities, however. Polka Mishra, chief wealth adviser at Javelin Wealth Management, told CNBC the firm continues to favor American stocks, citing resilient economic growth, easing inflation and continued leadership in artificial intelligence.

"The most attractive market at this point is the most resilient, and it has continued to show the exceptionalism that we've all continued to question for a few years now," Mishra said.