Market Updates

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.

Despite the upturn in market sentiment, it is clear to us that the global economy is not yet through the woods with regards to avoiding a recession; hence, chatter around potential rate cuts isn’t necessarily all positive.

BlackRock believes that attention to detail is crucial as government bond yields reach multi-year highs. They express a more optimistic stance on short- and medium-term Developed Market (DM) bonds, adjusting their strategic outlook to account for prolonged high interest rates over a five-year period and beyond.

US Thanksgiving holiday week is traditionally a quiet one for equity markets globally, and last week proved to be just that. There were very little in terms of market catalysts, and equities slowly grinded higher

The drop in long-term U.S. Treasury yields last week, triggered by reports of slowing U.S. inflation, highlights the enduring volatility in the current era of heightened macro uncertainty. This disconnection has the potential to overshadow the opportunities presented by the new regime, a central observation from BlackRock’s 2024 Outlook Forum last week.

The October US Consumer Price Index reading decelerated at a faster-than-expected rate, fuelling hopes for a dovish pivot from the Federal Reserve. Market expectations are now pricing in a Fed rate cut by May or June 2024, with all eyes on the next Fed meeting on 13 December.

The excitement surrounding AI is growing, as tech shares continue to outperform and leading players prepare to unveil new AI tools. BlackRock views AI as one of the five mega forces, representing structural shifts capable of generating returns both presently and in the future.

Some important inflation data points will dominate the narrative this week, with PPI and CPI prints from the United States, the United Kingdom and European Union later in the week.

In response to market adjustments, BlackRock discovers a plethora of detailed opportunities. They remain discerning when it comes to developed market stocks and bonds, exploring markets such as Japanese stocks due to favourable corporate earnings and reform initiatives.

The Bank of Australia holds its policy meetings on Tuesday and markets anticipate its key interest rate will be lifted by 25 bps after a four-month pause. It could prove an interesting contrast versus the picture developing elsewhere, as the European Central Bank, Fed and BoE all remained on hold at recent meetings.