Market Updates

The impact of the pandemic and bank turmoil on commercial real estate sectors has varied as well. BlackRock went underweight private growth assets from a view of five years and over in 2023’s first quarter. That includes the commercial real estate sector where they projected negative returns for since June 2022. They expect retail cap rates to keep rising due to pressure from e-commerce growth.

There is plenty to focus on this week, with some key macro data coming out (US CPI), the US debt ceiling in focus (Biden-Congress talks), and the Bank of England decision (Thursday). In addition, the concerns around the US regional banks will no doubt remain a driver for markets.

The share of fixed income indexes yielding over 4% is at its highest level since 2008. BlackRock think that investment grade credit is currently offering good income and particularly like very short-term, high-quality government paper, emerging markets local currency debt and high-quality credit.

Corporate earnings will continue to dominate this week, with tech heavyweights a focus in the United States. Microsoft, Alphabet, Meta and Amazon, all report this week. A large number of European and Asian companies also report earnings this week.

BlackRock do not think emerging market shares are reflecting the likely growth outperformance of emerging economies this year. It may seem an unusual time to favor emerging markets after major central banks’ rapid interest rate hikes. Yet BlackRock have seen a clear resilience in emerging market economic activity even as rising rates have slowed developed market activity.

BlackRock believe in a new approach to building portfolios. They are breaking up traditional asset allocation buckets, moving away from broad allocations to public equities and bonds. BlackRock think strategic views need to be more granular – across sectors and within private markets – to help build more resilient portfolios in the new regime.

A much busier week ahead is expected, with plenty of corporate earnings, macro data and Fedspeak to focus on. There is a robust US earnings calendar this week, with a few heavyweights reporting in the coming days.

BlackRock think that the market pricing in repeated rate cuts suggests investors are underestimating inflation’s persistence and expecting central banks to come to the rescue. They see sticky inflation preventing cuts in 2023. BlackRock also explain why they are neutral on euro area inflation-linked government bonds and prefer U.S. counterparts.

According to BlackRock, the U.S. and European policy initiatives are about getting a slice of the growing clean-tech pie and reducing reliance on China for minerals and metals needed for the transition. They see this as the start of a clean energy race as countries rush to adopt similar policies.

In terms of seasonality, April has historically been a strong month. The one theme we keep coming back to is the recent inflows into global money market funds.