Ask Your Advisor: Should I pull out of the US stock market?

You can’t blame some clients to be worried about their equity portfolios. With the tariff wars, geopolitical uncertainties, and US market woes, they want to know if there is a silver lining on the horizon.

We believe, however, that the US market continues to exhibit resilience. And as for Philippine equities, there is a compelling case for strong fundamentals.

Here’s what investors need to consider.

The case for staying invested in US equities

US exceptionalism remains a dominant theme, with the country maintaining leadership in technological innovation and economic growth.

The US market’s ability to sustain momentum despite global uncertainties has been bolstered by a strong earnings season in January. This performance supports high valuations, which, while expensive, reflect underlying corporate strength.

The technology sector, in particular, continues to drive market leadership. Heavy capital expenditure in AI and data centers has reinforced the sector’s long-term growth potential.

Notably, the S&P 500, while down 3.29% year-to-date (YTD) from January 2 to March 19 this the year, is still 8.63% up a year ago. NVIDIA, among others, fueled this exuberance in the market. Despite falling 15.03% since January this year, the chipmaker has soared 30.04% since a year ago.

Additionally, financials benefit from merger and acquisition activity, while healthcare sees a resurgence with promising drug developments, such as Eli Lilly’s recent weight-loss drug trial success.

Challenges in the US market

While the US economy remains strong, risks persist. Elevated valuations can create vulnerabilities if economic growth slows or interest rates remain higher for longer.

Additionally, geopolitical factors—including tariff policies from US President Donald Trump—could create uncertainty, particularly for multinational corporations and sectors exposed to global trade. Market volatility has also increased, leading to shorter investment cycles and greater emphasis on stock selection.

For investors seeking diversification, reducing US equity exposure in favor of alternative markets may be worth considering. However, a complete exit from US stocks may not be necessary, given the country’s structural advantages in innovation and market stability.

The Philippine equity outlook

Domestically, the Philippine stock market presents a favorable environment for investors. The country’s fundamentals remain solid, with corporate earnings demonstrating resilience despite global headwinds.

The Philippine Stock Exchange Index (PSEi) is projected to reach 7,400 in 2025, supported by expected earnings growth of 10.8% year-over-year. Banks remain strong performers, with Metrobank (MBT), BDO Unibank (BDO), and Bank of the Philippine Islands (BPI) seeing 13.97%, 11.73%, and 20.0%% in 2024, respectively. Meanwhile, utilities and telcos, such as MERALCO and Globe Telecom, provide stable dividends in a volatile market.

The Philippine market’s valuation remains attractive, particularly in a rate-cutting environment. The PSEi’s forward P/E ratio of 11.54x remains below historical averages, making it an appealing investment destination.

However, volatility persists, requiring a more selective approach. Stock-picking remains a key strategy, with opportunities in sectors such as banking, utilities, and consumer goods. Selective foreign exposure, particularly in dividend-yielding and defensive stocks, can further mitigate risks.

What should investors do?

Rather than making drastic shifts, investors should focus on tactical adjustments. Maintaining exposure to US equities, particularly in quality and defensive sectors such as financials and healthcare, remains a sound strategy.

At the same time, increasing allocations to Philippine equities, where valuations are attractive and earnings remain robust, provides diversification and growth potential.

Heightened volatility and shorter market cycles underscore the need for active portfolio management. Selective investing in both US and Philippine markets, with an emphasis on earnings visibility and strong fundamentals, will position investors for success amid uncertain global conditions.

(Disclaimer: This is general investment information only and does not constitute an offer or guarantee, with all investment decisions made at your own risk. The bank takes no responsibility for any potential losses. You may consult your relationship manager or investment specialist for proper investment advice.)

MARIA CHRISTINA “YNA” VIRTUDAZO is an Investment Counselor at Metrobank’s Institutional Investors Coverage Division. Her work involves analyzing High Net Worth clients’ portfolios and providing actionable insights and recommendations to better enhance their portfolios’ overall returns. She is a licensed Fixed Income Market Salesperson of the Securities and Exchange Commission and a certified Unit Investment Trust Fund (UITF) salesperson. She graduated with a bachelor’s degree in business administration from the University of the Philippines – Diliman. She spends her free time listening to K-pop, writing fanfiction, and watching Netflix series and K-dramas.