New Franklin Templeton research shows IFAs are advising clients to hold firm on US equity allocations against backdrop of market volatility from Trump Tariffs

• Two thirds of IFAs surveyed are advising their clients to maintain or increase US equity allocations despite recent turbulence
• Over a third (36%) of respondents say they are allocating more than 25% of their portfolio to US equities
• 50% believe the US equity rally will broaden beyond mega-cap technology stocks in H2 2025

London, 28 July 2025 – A recent Franklin Templeton¹ survey which explores the sentiment of UK Independent Financial Advisers (IFAs) towards US equities² found that nearly two thirds (64%) of respondents have been advising their clients to either maintain (50%) or increase (14%) their allocations to US equities, against the backdrop of increased bouts of volatility following the US administration’s tariff policy.

The survey, conducted by Opinium³, highlights that IFAs are looking beyond the short-term volatility and remain confident in the long-term potential of US equities signalling that US exceptionalism is far from over.

The appeal of US equities remains robust as clients’ current exposure remain stable, with almost half of IFAs (45%) currently allocating 10% to 25% of their clients’ portfolios to US equities. Additionally, over a third (36%) say they are allocating more than 25% to US equities.

Michael Browne, Global Investment Strategist, Franklin Templeton Institute said: “While tariffs may have shifted trade dynamics, the strength of the US economy and its global influence remain intact. The volatility from the new tariffs has created some short-term noise, but markets knew this was coming and have largely priced this in.

“The majority of advisers we surveyed are looking beyond the volatility, encouraging their clients to hold or increase their position in US stocks. History shows us that the US often absorbs trade shocks and recovers quickly, thanks to its fundamental structural growth, continuous innovation, and strong corporate earnings."

Impact of ‘Liberation Day’ tariffs

The ‘Liberation Day’ tariffs have had a significant impact on various markets, affecting trade flows, prices, and economic stability. This has influenced how IFAs have approached their clients’ asset allocation, with six in ten (60%) changing their strategies in response to the impact of the tariffs.

Among these, one in six (16%) have increased their global asset allocations to actively managed strategies, and a further 15% have increased their allocation to alternative assets as a hedge against volatility. In addition, one in ten (10%) have either moved assets into defensive or lower-risk holdings or have rebalanced portfolios to reduce exposure to tariff-affected sectors.

Contrary to recent data⁴ suggesting that investors are starting to reconsider their US equity allocation, two fifths (40%) of IFAs say the tariffs have not influenced how they currently manage assets for their clients. Despite short term allocation changes in early-stage flow data, Franklin Templeton’s research shows IFAs are saying put, reaffirming the view of investing for the long-term and looking beyond the volatility.

Shep Perkins, CIO, Putnam Investments commented: “One of the primary goals of President Trump's agenda is to revive industrial production, manufacturing and mining in the US. As the debate over the best tactics to achieve this goal continues, these efforts are expected to gain momentum, though their impact may not be uniform across all regions.  

“Among US equities, some of the biggest opportunities are expected in the industrials, utilities and healthcare sectors, particularly through the construction of new manufacturing facilities and the procurement of energy to operate them. While traditional manufacturing sectors such as automotive often dominate the headlines, the strategic focus is increasingly on industries such as AI, semiconductors, biopharma (including vaccines) and critical minerals. These sectors are seen as critical to national security and economic competitiveness, as opposed to the less strategic consumer goods industries.

“At Putnam, stock selection is the primary driver of our team’s outperformance. We don’t try to forecast the duration or scale of macroeconomic disruptions or market volatility. As an active equity manager, our goal is to deliver consistently good results to investors year after year,” Perkins added.

Market diversification and sector preferences 

Given the recent domination of the “Magnificent Seven” in US equities, a third (33%) of IFAs are now seeking broader diversification through increased allocation to other sectors. Over the next 6 months, half of IFAs (50%) agree that the US equity rally will broaden beyond mega-cap tech. Small and mid-cap sectors could benefit from the market broadening with over two fifths (42%) suggesting they could outperform mega-caps in H2 2025.

Conversely, nearly two fifths of IFAs (39%) believe the ‘market broadening’ narrative is overhyped, and that mega-caps will continue to lead. Over a quarter (27%) are maintaining their current exposure with a further 15% saying that they are making no changes to their strategy, remaining confident in the long-term strength of the dominant tech companies.

Drilling down into market cap size preferences within the US equity markets, over half of IFAs (53%) see opportunities in mid-cap investments over the next 12 months, with small- and large-caps tied at 24%.

IFAs are also keeping a close eye on central bank decisions, with over two fifths (44%) agreeing that Fed rate could lead them to increase investments in small-cap and cyclical stocks. Just under half (45%) have rebalanced their client’s portfolio due to the valuation gap between US mega-caps and the rest of the market.

Volatility drivers

Over the next year, it is evident that geopolitical factors will continue to play a significant role in shaping market dynamics with just over half (51%) of IFAs saying that Trump administration policies and decision-making are likely to drive the greatest level of US equity market volatility. Similarly, over two fifths (41%) believe volatility will be driven by the resulting shifts in US economic policy, such as changes in trade or tariffs. However, around one in ten (12%) of IFAs adopt a more optimistic outlook, suggesting that not all factors will significantly impact US equity market volatility over the next 12 months.

Given the need to adapt portfolios to hedge against the recent volatility, it is not surprising that active management is preferred by nearly seven in ten (68%) IFAs over the next 12 months, while 32% favour passive management.

IFAs are divided on where they think the biggest opportunities are for investors in US equity markets over the next 12 months. When looking at the investment style, 46% said growth whereas 44% tilted towards value investments. One in ten (11%) believe income investments present the biggest opportunity.

Harry Reeves, Head of UK Wholesale, Franklin Templeton commented: “As we navigate the complexities of the current market landscape, uncertainty is a prevailing theme. Despite this, IFAs are adopting a more optimistic outlook, suggesting that not all factors will significantly impact US equity market volatility. Amidst this uncertainty, growth and value strategies can offer compelling opportunities, providing a potential sweet spot for investors seeking to balance risk and reward.

“Following the addition of the Putnam US Large Cap Value Fund⁵ and Putnam US Research Fund⁶ to our UK range earlier this year, we believe the case for US equities remains strong as investors seek diversified exposure to high-growth sectors and companies. From a UK investor standpoint, our message to clients is clear: stay invested, stay diversified, and don’t lose sight of the long-term growth potential that the US market continues to provide.”

Franklin Templeton is a leading provider of US equity solutions tailored to UK investors. The firm has a long track record of managing US equity funds and ETFs that offer broad exposure to different market segments and investment styles including large-cap, mid-cap and small-cap companies across Growth, Value and Income strategies.

About the survey

Opinium surveyed 200 IFAs between the 13^th - 24^th June 2025 through an online quantitative survey. The IFAs surveyed were from a range of types of firms including national adviser, member of a network and subscriber to service providers. Total number of assets for the firms range from £0-£1bn+. The IFAs regularly advise their clients on a range of services including personal retirement planning, personal protection, investment and savings, ISAs, OEICs, Unit trusts, Investment Trusts, taxation planning, equity release, structured investment products and mortgages.

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Contacts:

Saira Khan Senior Corporate Communications Manager Franklin Templeton Cannon Place, 78 Cannon Street London EC4N 6HL Tel: 0207 073 8644 Email: [email protected]

Dorine Johnson Head of Corporate Communications EMEA Franklin Templeton Cannon Place, 78 Cannon Street London EC4N 6HL Tel: 0207 073 8538 Email: [email protected]

Notes to Editors:

This is a marketing communication. Please refer to the prospectus of the UCITS and to the KID before making any final investment decisions.

1. Franklin Resources, Inc. [NYSE:BEN] is a global investment management organization with subsidiaries operating as Franklin Templeton and serving clients in over 150 countries. Franklin Templeton’s mission is to help clients achieve better outcomes through investment management expertise, wealth management and technology solutions. Through its specialist investment managers, the company offers specialization on a global scale, bringing extensive capabilities in fixed income, equity, alternatives and multi-asset solutions. With more than 1,500 investment professionals, and offices in major financial markets around the world, the California-based company has over 75 years of investment experience and $1.61 trillion in assets under management as of 30 June 2025.
2. Opinium research of 200 UK IFAs surveyed between (13th-24 June 2025)
3. Opinium is an award winning strategic insight agency built on the belief that in a world of uncertainty and complexity, success depends on the ability to stay on pulse of what people think, feel and do. Creative and inquisitive, we are passionate about empowering our clients to make the decisions that matter. We work with organisations to define and overcome strategic challenges – helping them to get to grips with the world in which their brands operate. We use the right approach and methodology to deliver robust insights, strategic counsel and targeted recommendations that generate change and positive outcomes.
4. Investors take £622 million from North American equity funds, as US tariffs and policy environment starts to bite - IA monthly retail stats | Press Releases | The Investment Association
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6. The FTGF Putnam US Research Fund is a sub-fund of the Irish domiciled Franklin Templeton Global Funds plc range. FTGF is an open-ended investment company with variable capital, organised as an undertaking for collective investment in transferable securities ('UCITS'). FTGF is authorised in Ireland by the Central Bank of Ireland. Information has been prepared from sources believed reliable. It is not guaranteed in any way by any Franklin Resources, Inc. company or affiliate (together 'Franklin Templeton'). Before investing you should read the application form Prospectus and KID. The fund documents may be obtained free of charge in English, French, German, Italian and Spanish from FTGF's registered office at Riverside Two, Sir John Rogerson's Quay, Grand Canal Dock, Dublin 2, Ireland, from FTGF's administrator, BNY Mellon Fund Services (Ireland) Limited, or can be requested via FT's European Facilities Service which is available at https://www.eifs.lu/franklintempleton, or please visit www.franklintempleton.co.uk to be directed to your local Franklin Templeton website.

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