QUESTION OF THE WEEK

Which view most merits questioning?

Every other week, we ask for your thoughts on a top question our portfolio managers and strategists are debating. We share the final poll results and our insights.  

    Growth and inflation expectations are benign, valuations are borderline expensive, and volatility is muted. This suggests that complacency is high.

    Given the current market environment, which consensus view do you see most at risk of repricing?

    • Inflation is transitory (45%)
    • 2022 growth above trend (18%)
    • China risk contained (22%)
    • Worst of Covid-19 over (15%)

    Source: BlackRock Investment Institute, with data from SurveyMonkey. Note: Data does not include results from BlackRock social media polls.

      Poll results 

      Most poll respondents (44%) to our public poll voted that inflation proving transitory should be the consensus view that most merits questioning. This was followed by China risks contained (22%), 2022 growth above trend (18%) and the Worst of Covid-19 over (15%).
      This was in line with BlackRock portfolio managers votes: more than 4 in 10 investors (44%) questioned the narrative that inflation is transitory. The next most challenged view was that China risks will remain contained. 

      Is inflation transitory?

      The BlackRock Systematic Fixed Income team points to forecasts for U.S. growth already being revised down, lower consumer confidence than typically seen in an expansionary phase, upcoming fiscal tightening and tapering by the U.S. Federal Reserve and the European Central Bank as all potentially weighing on growth. 
      Others saw the potential for several supply constraints to persist for longer than expected. One portfolio manager in the BlackRock Active Equity group saw the main driver of inflation going forward will be fragility in the economic system – individual events like the blockage of the Suez Canal and even the shutdown in production by a single U.S. fertilizer company have been enough to trigger massive global supply issues. Other portfolio managers have been keeping an eye on whether wage inflation will spread beyond the low-wage sector, where it is currently concentrated. Inflation probably is transitory, according to a portfolio manager in the Global Fixed Income group, but they thought the market is underappreciating the uncertainty around it – and saw the biggest repricing risk in the pace of Fed rate hikes. 

      Sticky inflation 

      The BlackRock Investment Institute has long held the view that inflation is poised to stay higher over the medium term for reasons beyond just the accelerated post-pandemic activity restart. These reasons include new central bank objectives, the journey to net zero and the resilience of the service sector that is pushing costs higher. 
      To learn more, check out BII’s September 2021 updated Global Outlook that digs into our latest macro and investment views, including on China.

       

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