Market Updates

More than half the world’s population will vote in 2024, and BlackRock is monitoring the investment implications. They believe that governments and candidates have limited solutions for key financial issues affecting voters. As a result, BlackRock remains overweight on U.S. stocks ahead of the U.S. election but remains cautious on long-term U.S. Treasuries.

Major central banks are preparing to reduce interest rates. However, BlackRock believes this cutting cycle will be as atypical as the previous hiking cycles. The European Central Bank (ECB) is expected to begin easing before the Federal Reserve (Fed), but according to BlackRock, the policy gap between them will be temporary, even though another Fed hike is not out of the question.

Blackrock highlights infrastructure’s key role amid major trends like AI, which boosts capital spending and impacts energy transitions through data centers. They favor AI investments and note supply chain shifts benefiting India and Mexico. They also see strategic value in private infrastructure equity

BlackRock anticipates that the new macroeconomic environment, characterized by increased volatility, will lead to more frequent valuation changes across asset classes. While short-term outcomes may not always be influenced by valuations, they remain significant in the long run.

The twelve-month returns for the MSCI Japan are close to 14% in U.S. dollar terms. BlackRock doesn’t anticipate that the recent slide in the yen to 34-year lows against the dollar will derail this momentum.

In a world influenced by structural forces and supply dynamics, uncertainty for the Fed and markets is heightened. This is why BlackRock relies on new data rather than Fed signals to assess the policy path.

For a long time, BlackRock has analyzed the world through the lens of mega forces, or significant structural shifts. These forces not only explain long-term macro and market outcomes but also have immediate implications. Geopolitical fragmentation is one of the five mega forces they monitor.

In 2024, we witnessed two distinct narratives unfold. Initially, cooling inflation and robust corporate earnings supported a positive risk appetite.
However, later in the year, resurging inflation emerged, disrupting market sentiment. While BlackRock maintain an overweight position in U.S. stocks, they remain prepared to adapt to changing market conditions.

Robust U.S. economic expansion and corporate earnings have bolstered risk sentiment, propelling stocks to record levels, despite notable increases in bond yields. BlackRock anticipates that earnings performance will be crucial in meeting elevated market expectations, particularly following recent data revealing persistent inflation concerns that unnerved investors.

The working-age populations in developed markets (DMs) are dwindling, contrasting with the growth observed in emerging markets (EMs). This trend adversely affects economic growth in DMs while bolstering growth prospects in EMs—a divergence that, according to BlackRock, is widely evident in asset valuations.