The U.S. Q4 corporate earnings season is currently underway. BlackRock believes that this won’t dampen the positive risk appetite at the moment. They maintain an overall overweight position in U.S. stocks, anticipating that the optimistic market sentiment will continue for now.
The surge in U.S. tech stocks fuelled by enthusiasm for artificial intelligence (AI) uplifted the market throughout 2023. According to BlackRock, the current rally shows potential for continuation, although they remain flexible in anticipation of a resurgence in inflation later this year.
The unfolding events in Asia and the Middle East underscore the significance of geopolitical fragmentation, one of the five mega forces or structural shifts monitored by BlackRock. This fragmentation stands out as a crucial factor contributing to persistent inflation pressures, prompting the maintenance of policy rates above pre-COVID levels.
BlackRock concurs that inflation is expected to approach 2% this year, thereby bolstering that narrative at present. They will closely observe the earnings season for any indications of vulnerabilities, particularly in the context of elevated valuations.
The momentum from the end-2023 rally might extend deep into 2024 with further easing of inflation. However, the uneasy beginning of the year for stocks and bonds indicates investor apprehension regarding the macroeconomic outlook. BlackRock remain adaptable and believe that managing macro risks should be a deliberate focus.
BlackRock shares three insights from the experiences of 2023 to guide their investment strategy in the coming year: Firstly, the market’s fluctuation between macro narratives. Secondly, increased dispersion is generating opportunities. Thirdly, the impact of artificial intelligence buzz.
Global equities marched higher again last week. The key driver behind the equity market moves was the Fed’s signalling of rate cuts in 2024, with the message that inflation had surprised to the downside taken as dovish.
BlackRock believes that the current era of heightened macro and market volatility calls for seizing control and adopting an active portfolio approach. Their 2024 Global Outlook details their strategy in navigating these conditions.
Rising market expectations of central bank 2024 rate cuts, fuelled by falling inflation data, means this week’s central bank meetings will be a key catalyst into year end.
The move towards low-carbon initiatives is one of the five significant forces or structural shifts that BlackRock observes for investment opportunities and risks. During the UN climate conference (COP28) in Dubai, their focus is directed towards three investment themes: climate resilience, facilitating climate finance in emerging markets, and new policy initiatives that may influence the trajectory of the transition.
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