BlackRock Investment Institute Videos

­Market take

Weekly video_20231002

Vivek Paul

Opening frame: What’s driving markets? Market take

Camera frame

Markets are adjusting to the new, more volatile regime. The recent spike in 10-year Treasury yields and the sharp pullback in equites is evidence of that, in our view.

Title slide: Finding new opportunities as Q4 starts

As markets adjust, we find different yet abundant investment opportunities. To find them, we must first acknowledge that not all yield rises have the same investment implications.

1: Government bond pricing shifts

This year’s yield spikes have been mostly from the market repricing its policy rate expectations.

We think that is now largely done, but we expect the compensation investors demand for the risk of holding long-term bonds to rise further. That will push yields higher, as markets price in factors such as persistent inflation and high debt loads. As a result, we stay underweight long-term bonds.

2: A more nuanced equity story

This term repricing, in and of itself, isn’t necessarily an issue for equities. 

We stay underweight broad U.S. and European equities in the short-run as stocks don’t fully reflect stagnant growth.

Outro frame: Here’s our Market take 

The macroeconomy may not be your friend, but opportunities are plentiful.

Within fixed income, we like UK gilts and European bonds given major market repricing. We stick with short-term U.S. Treasuries. Repricing largely reflects a view that policy rates will be structurally higher. Within equities, it’s all about being selective. We see opportunities in artificial intelligence and Japan.

Closing frame: Read details: 

www.blackrock.com/weekly-commentary

BlackRock Bottom Line: BlackRock Investment Institute 2023 Midyear outlook

Speaker:
Wei Li
BlackRock Global Chief Investment Strategist

Script

2023 has provided more evidence that we’re in a new, more volatile regime. As we look ahead to the rest of the year, we see abundant investment opportunities – but they’re different than those in the past.

Our 3 investment themes for the 2023 midyear outlook are: holding tight, pivoting to new opportunities and harnessing mega forces.

Holding tight is our first theme. In a world shaped by supply constraints, we see central banks being forced to keep policy tight to lean against inflationary pressures. This actually means macro might not always be our friend and this marks a shift from the low-rate environment that prevailed before the pandemic.

Our second theme is pivoting to new opportunities. Greater volatility has brought more divergent security performance relative to the broader market. We think that creates opportunities to generate returns by getting more granular with views and exposures.

The third theme is harnessing mega forces. These are structural changes we think could create big shifts in profitability across economies and sectors. They include the rise of artificial intelligence, the rewiring of globalization driven by geopolitics and the transition to a low-carbon economy, to name a few. The key here is to identify the catalysts that can supercharge them and whether all this is priced in today.

The bottom line is that, even in this more volatile regime, we think there are plenty of investment opportunities that can be captured by getting granular within asset classes and harnessing mega forces. 

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