Jean Boivin – Head of BlackRock Investment Institute together with Wei Li – Global Chief Investment strategist, Vivek Paul – Global Head of Portfolio Research, and Christopher Kaminker – Head of Sustainable Research and Analytics, all forming part of the BlackRock Investment Institute and Serge Lauper – Global Head for Infrastructure Solutions share their insights on global economy, markets and geopolitics. Their views are theirs alone and are not intended to be construed as investment advice.
Key Points
Infrastructure opportunity : Most investors could increase their infrastructure exposure, we think. It benefits from multiple mega forces yet currently trades at a discount.
Market backdrop : Stocks ended unchanged, masking big intraday moves triggered by jitters over AI investment. We see this as a reshuffling of winners, not the AI trade’s end.
Week ahead : U.S. jobs data this week could give some clarity on the Fed’s rate path. We see the nomination of Kevin Warsh as Fed chair easing pressure on the U.S. dollar.
The latest earnings from mega cap tech are still showing massive spending on AI, even amid market volatility and dispersion. We see a clear beneficiary: infrastructure. Most investors could increase their exposure to this diverse asset class, in our view. Beyond the AI buildout, multiple mega forces support long-term demand. Valuations look low to fair versus history. And cash flows that often adjust with rising prices can help hedge inflation risk.
Infrastructure, traditionally viewed as a stodgy defensive sector, is now at the center of interlocking mega forces. Geopolitical fragmentation is leading governments to emphasize energy security. Population growth in emerging markets requires upgrading urban infrastructure. Nuclear and renewable power for the low-carbon transition often need more up-front investment than traditional energy sources. Yet valuations, weighed down as interest rates have climbed, do not reflect this growth potential. Listed infrastructure equities trade at nearly 20% below their long-term average on enterprise-value-to-EBITDA multiples – below levels at the financial crisis and similar to the COVID shock. See the chart. Private infrastructure assets trade closer to long-term averages, we believe, but lets investors tap a much wider universe of assets.
Investors can tap infrastructure through a wide range of sectors and exposures. It spans transport, energy, telecom and digital networks and water and waste management, and can be accessed through debt and equity in both listed and private markets. Yet most investors are under-allocated, even the large institutions that historically dominate illiquid asset investing. Analysis from our recent paper (for professional investors only) shows that a typical U.S. corporate pension with similar risk to a 70/30 equity-bond split has infrastructure-like exposure of about 4 to 5% through equity and credit holdings such as utilities. Why so little? Infrastructure lacks the familiarity of mainstream stocks and bonds, and its long investing horizons has made it the purview of select institutional investors. Yet our analysis shows that corporate pension funds can more than double their current levels of exposure for increased portfolio efficiency: greater return for similar overall risk.
A helpful hedge against sticky inflation
Infrastructure holdings are particularly helpful when supply chain constraints stoke inflation and mega forces cloud the long-term outlook. Growth is solid right now, but inflation is getting “stickier,” as Federal Reserve Chair Jerome Powell said after holding policy rates steady last week. Investors need income sources that have a low risk of eroding in such an environment. Infrastructure’s cash flows are often supported by regulation or long-term contracts that adjust with inflation, offering predictable income. We especially like infrastructure equity among private growth assets on a five-year-plus horizon.
What are the risks? First: an AI bust chokes data center and energy infrastructure demand. We see this as overblown for the sector. The reason: strong legal protections. Companies pay for space even if they don’t use it; early lease terminations are limited; and tenants front any increases in energy costs. Second: the risk of rising real rates raising the return bar for infrastructure assets. This risk has been front and center recently, with a rapid rise in the term premium pressuring the U.S. dollar and Treasuries as global investors rethink U.S. exposure. We see the nomination of Kevin Warsh as Federal Reserve chair mitigating the risk for now thanks to his financial crisis experience and likely focus on preventing global spillovers.
Our bottom line
We like infrastructure. Mega forces like AI are driving long-term demand, but valuations don’t yet reflect that. We think most investors can allocate more and particularly favor infrastructure equity among private growth assets.
Market backdrop
Stocks were little changed on the week, even as the S&P 500 notched a 1.7% intra-day decline last Thursday on jitters over AI investment. We see the latter as a reshuffling of winners, not as backlash against the AI trade. The U.S. dollar plumbed four-year lows, then perked up on news of the Warsh nomination. Precious metals that had become perceived safe havens during the term premium shock saw their biggest losses since the 1980s.
We look to U.S. jobs data for a cleaner read on the labor market. A “no hiring, no firing” stasis let the Fed trim rates last year, but wage pressures could limit cuts in 2026. The bigger question: How would Fed chair nominee Kevin Warsh navigate pressure to cut rates? Given Warsh’s financial crisis experience, we think he will focus on preventing global market spillovers. We see this supporting the U.S. dollar and easing the risk of spikes in long-term yields.
Week Ahead
Feb. 3 : U.S. job openings and labor turnover
Feb. 4 : Euro area inflation
Feb. 5 : ECB, BoE policy rate decisions
Feb. 6 : U.S. payrolls, University of Michigan consumer sentiment
BlackRock’s Key risks & Disclaimers:
This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of 2nd February, 2026 and may change. The information and opinions are derived from proprietary and non-proprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This material may contain ’forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader.
The information provided here is neither tax nor legal advice. Investors should speak to their tax professional for specific information regarding their tax situation. Investment involves risk including possible loss of principal. International investing involves risks, including risks related to foreign currency, limited liquidity, less government regulation, and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are often heightened for investments in emerging/developing markets or smaller capital markets.
Issued by BlackRock Investment Management (UK) Limited, authorized and regulated by the Financial Conduct Authority. Registered office: 12 Throgmorton Avenue, London, EC2N 2DL.
MeDirect Disclaimers:
This information has been accurately reproduced, as received from BlackRock Investment Management (UK) Limited. No information has been omitted which would render the reproduced information inaccurate or misleading. This information is being distributed by MeDirect Bank (Malta) plc to its customers. The information contained in this document is for general information purposes only and is not intended to provide legal or other professional advice nor does it commit MeDirect Bank (Malta) plc to any obligation whatsoever. The information available in this document is not intended to be a suggestion, recommendation or solicitation to buy, hold or sell, any securities and is not guaranteed as to accuracy or completeness.
The financial instruments discussed in the document is intended for retail clients however, it may not be suitable for all investors and investors must make their own informed decisions and seek their own advice regarding the appropriateness of investing in financial instruments or implementing strategies discussed herein.
If you invest in this product you may lose some or all of the money you invest. The value of your investment may go down as well as up. A commission or sales fee may be charged at the time of the initial purchase for an investment. Any income you get from this investment may go down as well as up. This product may be affected by changes in currency exchange rate movements thereby affecting your investment return therefrom. The performance figures quoted refer to the past and past performance is not a guarantee of future performance or a reliable guide to future performance. Any decision to invest in a mutual fund should always be based upon the details contained in the Prospectus and Key Information Document (KID), which may be obtained from MeDirect Bank (Malta) plc.
