BlackRock launches large-cap U.S. stock ETF betting that big companies will continue to dominate the market

According to Zhitong Finance APP, BlackRock has launched an exchange-traded fund (ETF) that invests in the top 20 large companies in the United States, the iShares S&P 500 Top 20 UCITS ETF, allowing European investors to target U.S. large-cap stocks at a lower cost. The fund has an expense ratio 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 U.S. stock market during the company's 2025 Outlook Forum held last week. Although U.S. stock valuations appear high, BlackRock's managers believe that American exceptionalism, characterized by strong economic and corporate earnings growth, still has significant room for expansion.

Jean Boivin, head of the BlackRock Investment Institute, stated, "The situation in the U.S. remains in stark contrast to the lagging economic growth and stock market performance in Europe."

Artificial intelligence (AI) has been a significant factor driving large tech giants to the top of the S&P 500 index. Boivin said, "Quantifying the long-term economic impact of AI remains challenging, but we believe AI has the potential to reshape the economy and drive economic growth."

AI is also a major reason for BlackRock's increased holdings in U.S. stocks. Boivin noted, "As tech companies continue to exceed high earnings expectations, the valuations of AI beneficiaries have been supported. The decline in inflation is alleviating pressure on corporate profit margins."

The company is also looking for investment opportunities among AI beneficiaries outside the tech sector.

BlackRock is not the only company optimistic about the prospects for U.S. stocks. BofA Securities conducted a survey of global fund managers after Donald Trump's election victory last week, with 43% predicting that U.S. stocks will be the best-performing asset class next year.

Trump's victory significantly shook sentiment. In a similar survey conducted by BofA before the election, 27% of the 213 respondents predicted that the U.S. would perform better than other countries next year.

Survey: Which asset class will perform best in 2025?

This confidence was reflected in the stock market, as U.S. stocks recorded their largest weekly gain of the year last week. Boivin stated, "Despite ongoing uncertainty regarding mid-term policies, the market welcomed the decisive outcomes that eliminated some short-term uncertainties."

At the beginning of November, a net 4% of fund managers told BofA that they expected the global economy to weaken. However, after the presidential election, a net 23% indicated they predicted the global economy would strengthen, marking the most optimistic result since August 2021 The global fund manager survey released by Bank of America yesterday shows that increasing holdings in the "seven giants of U.S. stocks" remains the most crowded trade in the fund management sector. This trade is highly profitable. Data from BlackRock indicates that over the past three years, the largest 20 companies in the S&P 500 have contributed more than two-thirds (68%) of the index's returns.

Survey: What do fund managers currently consider the most crowded trade?

To further illustrate the dominance of mega-cap companies, the total market capitalization of the eight largest publicly traded companies in the U.S. currently reaches $15 trillion—equivalent to the entire market capitalization of the U.S. stock market in 2000.

However, the relative performance trajectory of large-cap stocks versus small-cap stocks may soon change. Small-cap stocks have gained strong returns in the post-election rebound, and Trump's "America First" policy and deregulation are expected to benefit small businesses focused on the domestic market.

Survey: Net % of fund managers believe small-cap stocks will outperform large-cap stocks

After the election, a net 35% of fund managers told Bank of America that they expect small-cap stocks to outperform large-cap stocks, the highest level since February 2021. At the beginning of November, a net 3% of fund managers indicated that they expected small-cap stocks to outperform large-cap stocks