BlackRock Investment Institute Videos

­Market take

Weekly video_20240506

Nicholas Fawcett

Opening frame: What’s driving markets? Market take

Camera frame

The past few months of inflation surprises have confirmed that we’re in a fundamentally more volatile environment – creating greater uncertainty for both markets and the Fed.

Title slide: Looking through the Fed’s signals

That’s why we watch incoming economic data, not Fed policy signals, to gauge the policy path.

1: Evolving policy signals

In December, the Fed saw inflation falling toward 2% by the end of 2024, signaling a green light to cut rates this year. Markets priced in seven cuts. Yet goods and services inflation have since been hotter than expected.

The Fed now accepts rates need to stay high for longer given sticky inflation. It also pushed back against hikes. But greater uncertainty just makes it harder for both markets and policymakers to predict what’s ahead.

We see high-for-longer interest rates, a view markets now reflect.

2: Corporate earnings offer support

Markets pricing out rate cuts usually hurts stock valuations. Yet U.S. firms beating Q1 earnings forecasts by 10% has supported stocks.

Tech stocks and artificial intelligence beneficiaries have kept up their robust growth, while other sectors see recoveries as well.

Outro: Here’s our Market take

We see interest rates staying high for longer. We remain overweight U.S. stocks on a six- to 12-month tactical horizon.

We’re tactically neutral long-term bonds because yields could go up or down as markets adjust their policy expectations.

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.