BlackRock Investment Institute Videos

Market take

Weekly video_20251201

Nicholas Fawcett

Senior Economist, BlackRock Investment Institute

Opening frame: What’s driving markets? Market take

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The Federal Reserve looks poised to cut interest rates for the third time next week. We think it’s warranted. Why? September payrolls and recent jobless claims data highlighted some cooling in the labor market.

Title slide: Soft labor market keeps Fed cut in play

1: No hiring, no firing stasis

The Fed has a harder time understanding the economy given data delays tied to the long government shutdown.

But the September jobs report and other data show the labor market in a no hiring, no firing stasis. Both demand for workers and the supply of workers have fallen, with the latter due to a sharp slowing of migration.

2: A deluge of delayed data

The delayed data includes both October and November jobs numbers. They’re likely to be noisy and will come after the Fed meets on December 10.

Markets are mostly pricing in a quarter-point cut next week. We agree and think a softening labor market gives the Fed reason to cut further. That’s different from earlier this year when the Fed was facing calls to cut rates even with data showing strong job gains. Those calls highlighted the policy tension between tackling sticky inflation and keeping U.S. debt sustainable.

3: The UK’s positive budget surprise

Part of this tension stems from persistently large U.S. budget deficits. The opposite is happening in the UK: the government is trying to reduce its deficit and even achieve a surplus on a five-year horizon in the latest budget.

The UK Chancellor delivered a positive surprise with various revenue raises boosting the buffer between government revenues and spending by more than expected.

Outro: Here’s our Market take

We stay neutral on UK gilts as the new budget front-loaded spending and back-loaded much of the tax gains.

We think a Fed rate cut this month is in play as other indicators show the labor market softening. That backdrop, along with the AI theme, underpins our pro-risk stance.

Closing frame: Read details: 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.