BlackRock Launches U.S. Large-Cap Stock ETF Betting Big Companies Will Continue to Dominate the Market

BlackRock has launched an exchange-traded fund (ETF) iShares S&P 500 Top 20 UCITS ETF, which invests in the top 20 large companies in the United States, allowing European investors to target large US stocks at a lower cost. The fund has a fee rate of 0.2% and will be listed on the London Stock Exchange, Euronext Amsterdam, and Xetra. At the launch of the fund, BlackRock's portfolio managers expressed a positive outlook on the US stock market at the company's 2025 Outlook Forum last week. Despite the seemingly high valuations of US stocks, BlackRock's managers believe that the exceptionalism of the US, including strong economic and corporate profit growth, still has room for further development. Jean Boivin, head of the BlackRock Investment Institute, said, "The situation in the US stands in stark contrast to the performance of the European economy and stock market." Artificial intelligence (AI) has been a key factor driving large tech giants to the top of the S&P 500 index. Boivin said, "The long-term economic impact of quantified artificial intelligence remains challenging, but we believe that AI has the potential to reshape the economy and promote economic growth." AI is also a major reason for BlackRock's increased holdings in US stocks. Boivin said, "As tech companies consistently exceed high yield expectations, the valuations of AI beneficiaries are supported." "Falling inflation is easing pressure on corporate profit margins." The company is also seeking investment opportunities in AI beneficiaries outside of the tech industry. BlackRock is not the only company bullish on the prospects of US stocks. Following Donald Trump's victory in the recent election, BofA Securities conducted a survey of global fund managers, with 43% predicting that US stocks will be the best performing asset class next year. Confidence in the stock market was reflected, as the US stock market saw its largest weekly gain this year last week. Boivin stated, "Despite ongoing uncertainty about midterm policies, the market welcomed decisive outcomes that eliminate some short-term uncertainties." In early November, a net 4% of fund managers told BofA Securities that they expect the global economy to weaken. However, following the presidential election, a net 23% of people stated they predict the global economy will strengthen, the most optimistic result since August 2021. A survey released by BofA Securities yesterday showed that holding positions in the "Big Seven US Stocks" remains the most crowded trade in fund management. This trade has been highly profitable. BlackRock's data shows that over the past three years, the largest 20 companies in the S&P 500 index have contributed more than two-thirds (68%) of the index's returns. To further illustrate the dominance of mega-cap companies, the total market value of the top 8 listed companies in the US currently stands at $15 trillion - this is equal to the entire market value of the US stock market in 2000. However, the relative performance trajectory of large-cap stocks and small-cap stocks may soon change. Small-cap stocks have received a strong rebound after the election, and Trump's "America First" policy and deregulation are expected to benefit small businesses focused on the US domestic market. After the election, a net 35% of fund managers told BofA Securities that they expect small-cap stocks to outperform large-cap stocks, the highest level since February 2021. In early November, a net 3% of fund managers said they expect small-cap stocks to outperform large-cap stocks.