BlackRock Investment Institute Videos

­Market take

Weekly video_20240513

Ben Powell

Opening frame: What’s driving markets? Market take

Camera frame

Twelve-month returns for the MSCI Japan are near 17% in U.S. dollar terms [as of May 6, 2024].

Title slide: Weak yen unlikely to end Japan’s rally

We don’t see the recent slump in the yen to 34-year lows against the dollar derailing this momentum.

Japan’s growth outlook remains rosy and corporate reforms are taking hold.

1: Central bank policy intervention

An apparent intervention may slow the slide in the yen, but ultimately its weakness is due to divergent Bank of Japan and Fed policy rates, in our view.

The yen started depreciating in 2022 as the Fed kicked off its rapid hiking cycle. Its fall accelerated in April as the BOJ asserted it would not rush to unwind its loose policy, while markets pared back their pricing of Fed rate cuts for this year given sticky U.S. inflation.

We believe the yen could recover once the Fed cuts later this year.

2: Cheaper goods and a stronger consumer

A weak yen affects Japanese companies and sectors differently. Manufacturers that face higher input costs may suffer.

Yet Japanese goods becoming cheaper for overseas buyers will benefit exporters. A stronger consumer could support some sectors on the back of wage gains.

Outro: Here’s our Market take

We see diverging monetary policy driving the slide in the yen but we don’t see it persisting. We stay overweight Japanese stocks given ongoing corporate reforms and eye opportunities created by structural shifts.

Closing frame: Read details: 

www.blackrock.com/weekly-commentary.

BlackRock Bottom Line: 2024 Global outlook

Speaker: Wei Li, Global Chief Investment Strategist, BlackRock Investment Institute

Script:

Higher interest rates and greater volatility define the new regime we’re in. In turn, that’s creating greater dispersion of returns.

We think investors will benefit from taking a more active approach to portfolios as we head into next year. 

Here’s our three investment themes for 2024: number one, managing macro risk; number two, steering portfolio outcomes; and number three, harnessing mega forces.

BlackRock Bottom Line open

Title: BlackRock Investment Institute 2024 global outlook

Our first theme is managing macro risk. Production constraints mean central banks face tougher trade-offs between inflation and growth – they can’t respond to faltering growth like before. This leads to a wider set of outcomes and a more uncertain macro outlook.

We don’t think investors should wait for the macro environment to improve. Instead, they should look to neutralize macro exposures or be very deliberate about which risks they take.

Our second theme is steering portfolio outcomes. We believe the new regime rewards an active approach to portfolios. Greater volatility and dispersion of returns create space for investment expertise to shine – that involves being more dynamic with indexing and alpha-seeking strategies, while staying selective.

Our third theme is harnessing mega forces. We see five structural shifts reshaping markets and driving returns now and in the future. We think they have become important portfolio building blocks on their own.

The bottom line is: Going into 2024 in the new regime, we want to put money to work. We believe investors should take a more active approach to their portfolios and be deliberate in taking portfolio risk.