Picture your Future. Save for it by earning 1.5% on a 1-year Term Deposit Account! Learn more.

BlackRock Commentary: Our latest credit views

Mike Pyle, Global Chief Investment Strategist, together with Elga Bartsch, Head of Macro Research, Scott Thiel, Chief Fixed Income Strategist, and Beata Harasim, Senior Investment Strategist, all part of the BlackRock Investment Institute, share their insights on global economy, markets and geopolitics. Their views are theirs alone and are not intended to be construed as investment advice.

We have closed our tactical underweight in EM debt as easy monetary policy is expected to stay, against the background of an improved 2021 outlook. Positive news on Covid vaccine development has boosted the case for an accelerated global restart in 2021. This latest view change reflects our barbell approach between quality and cyclicality – with a tilt to cyclicality in our credit exposures.

Article Image 1

Past performance is not a reliable indicator of current or future results. It is not possible to invest directly in an index. Sources: BlackRock Investment Institute, with data from Refinitiv, November 2020. Notes: The indexes used are the Bloomberg Barclays Global High Yield Index, JPMorgan EMBI Global Diversified Index and JPMorgan GBI-EM Composite Index. Performance is indexed to 100 on Jan. 1, 2020.


EM assets have underperformed their developed market (DM) peers for most of 2020, and have been playing catchup in recent weeks. A string of positive news reports on Covid vaccines boosted confidence in an accelerated restart during the course of 2021, setting up a positive overall backdrop for risk assets. Encouraging early results on the effectiveness of a Covid-19 vaccine that may offer lower costs and easier distribution bode particularly well for the EM world, in our view. Most EM assets have now delivered positive year-to-date returns after the recent rally. EM local-currency debt has lagged the market recovery in U.S. dollar terms, dragged down by heavy currency depreciation in many emerging markets. See the chart above. Yet we see potential for EM local-currency debt to catch up as EM currencies stabilize thanks to a stable or moderately weaker U.S. dollar. We also expect EM hard-currency debt to keep pace with high yield credit in developed markets, as higher yielding debt looks attractive to investors in search of income.

The U.S. dollar is a key driver behind EM local-currency debt. We see risk appetite and interest rate differentials in turn driving the dollar’s moves. More positive risk appetite as a result of the improved economic outlook should limit the demand for perceived safe-haven assets such as the dollar, in our view. At the same time, we see declining real rates as inflation firms and the Federal Reserve caps any gains in nominal bond yields. The likely result is a moderately weaker dollar. This should support EM currencies and local-currency debt. We also expect more predictable foreign affairs and trade policies under the Biden administration to provide an improved backdrop for the EM world. Our BlackRock geopolitical risk dashboard – tracking market attention to the top 10 geopolitical risks – shows attention to global trade tensions has dropped sharply from recent peaks after staying at elevated levels for much of the past three years.

China is an important part of EM growth dynamics. The world’s second-largest economy is leading the global restart in activity, with its growth already at, or very close to, its pre-Covid trend. This bodes well for the rest of the EM world. Yet EM economies are also susceptible to the policy direction of China. Any aggressive tightening of monetary policy in China to prevent the economy from overheating – not our base case – could be negative for the rest of the EM complex, in our view. Another risk for some emerging markets: structural growth challenges and sharply rising debt levels in the wake of the Covid shock. Yet we do not see this as a near-term market risk due to ample global liquidity. Tactically we are overweight Asia fixed income as this region leads the global economic recovery. We view valuations in this market as attractive – and believe investors are well compensated for the risks. We are also overweight high yield – on both tactical and strategic horizons – as it provides attractive income in a yield-starved world.

The bottom line: We expect global growth to rebound strongly in 2021 with the rollout of Covid vaccines. This is why we prefer to tilt more toward cyclicality in our credit views as we take a barbell approach to allocate risk exposure to both quality and cyclical assets. We have upgraded both local-currency and hard-currency EM debt to neutral, after having upgraded EM equities to overweight. Meanwhile we have downgraded global investment grade credit as its valuations have increased and we prefer more cyclical exposures such as high yield.


Market Updates

Article Image 2

Past performance is not a reliable indicator of current or future results. Indexes are unmanaged It is not possible to  invest directly in an index. Sources: BlackRock Investment Institute, with data from Refinitiv Datastream, November 2020. Notes: The two ends of the bars show the lowest and highest returns at any point this year to date, and the dots represent current year-to-date returns. Emerging market (EM), high yield and global corporate investment grade (IG) returns are denominated in U.S. dollars, and the rest in local currencies. Indexes or prices used are: spot gold, Datastream 10-year benchmark government bond (U.S. , German and Italy), MSCI USA Index, Bank of America Merrill Lynch Global Broad Corporate Index, MSCI Emerging Markets Index, J.P. Morgan EMBI index, Bank of America Merrill Lynch Global High Yield Index, the ICE U.S. Dollar Index (DXY), MSCI Europe Index and spot Brent crude.

Market backdrop

Positive news on vaccine development and the formal start of U.S. President-elect Joe Biden’s transition to the White House drove global stocks to record highs. The expected nomination of former Fed Chair Janet Yellen as the Treasury Secretary also helped lift the mood. Yet the rally fizzled after disappointing jobs data pointed to a slowing of the restart as the virus surges around the U.S. We still expect the cumulative economic hit from the Covid shock will be just a fraction of that seen in the wake of the global financial crisis.

Week Ahead

  • December 1: Manufacturing purchasing managers’ index (PMI) for Japan, China, the euro area, U.S. and UK
  • December 3: Services PMI for Japan, China, the euro area, U.S. and UK
  • December 4: U.S. nonfarm payrolls

This week’s U.S. labor market report will be in focus, especially after recent weeks’ disappointing jobless claims data. A string of recent data has shown signs of activity flattening out in the U.S., even before some states tightened restrictions. Brexit could be back in the spotlight as markets await a potential trade deal with the European Union this week.

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 November 30th, 2020 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 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 and may be deducted from the invested amount therefore lowering the size of your 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 Investor Information Document (KIID), which may be obtained from MeDirect Bank (Malta) plc.

Join MeDirect today to access the tools you need to put your money to work on your own terms.

Latest news articles

BlackRock - Why we keep leaning into risk
All News

BlackRock Commentary: Why we keep leaning into risk

Investment opportunities are emerging amid a unique macroeconomic backdrop, with U.S. equities leading gains, particularly driven by AI-related companies, and expectations of continued volatility. The focus is on overweight positions in U.S., UK, and Japan stocks, while favoring quality short-term fixed income and private credit investments.

Epic Investment Partners Weekly Article
All News

Epic Investment Partners Views: The Week Ahead

This week’s key events include China’s Third Plenum, the ECB rate decision, US bank earnings, and several significant economic data releases from the US, Eurozone, and UK.. Last week, Fed Chair Powell highlighted progress on inflation but emphasised caution in rate cuts, while China’s economic recovery showed signs of weakness with lower-than-expected inflation and GDP growth.

Experience better Banking

The sooner you start managing your money, your way, using the best-in-class tools, the sooner you’ll see results. 

Sign up and open your account for free, within minutes.



We strive to ensure a streamlined account opening process, via a structured and clear set of requirements and personalised assistance during the initial communication stages. If you are interested in opening a corporate account with MeDirect, please complete an Account Opening Information Questionnaire and send it to corporate@medirect.com.mt.

For a comprehensive list of documentation required to open a corporate account please contact us by email at corporate@medirect.com.mt or by phone on (+356) 2557 4444.