MARKET INSIGHTS

Weekly market commentary

2024-11-11
  • BlackRock Investment Institute

Zeroing in on secular forces, not cycles

Market take

Weekly video_20241111

Vivek Paul

Opening frame: What’s driving markets? Market take 

Camera frame

We are in a world where multiple, starkly different outcomes are possible. The decisive US election outcome has stoked uncertainty about future US policy.

At our 2025 Outlook Forum last week, BlackRock investment leaders met to discuss how to invest given large structural shifts happening now.

Title slide: Zeroing in on secular forces, not cycles 

1: Tracking the transformation 

We have seen unusually sharp swings in 10-year US Treasury yields with key macro releases. We think that reflects investors viewing incoming data through the lens of a typical business cycle when structural changes are at play.

The goal of the Forum was to track the transformation being driven by these structural changes. We evolved our macro scenarios to better understand and position for the likely market impact. 

2: US strength and geopolitics in focus

Our portfolio managers are broadly positive on US stocks even if valuations look steep by some measures. The contrast with lagging European economic growth and stock performance remains stark.

Geopolitical fragmentation was consistently discussed given wars in the Middle East and Ukraine and tense China relations.

3: Gauging AI’s potential

AI and its energy and investment needs were still in focus following our June Forum. We generally agreed that the AI buildout can broaden to include other beneficiaries.

Quantifying AI’s longer-term economic impact remains a challenge, but we think it has the potential to reshape economies and boost economic growth.

Outro: Here’s our Market take 

Our Forum discussion sought to clarify how structural shifts are driving the investment opportunities we see while assessing what’s in the price.

We think having a solid framework is key for anchoring views in this unusual environment.

Closing frame: Read details: blackrock.com/weekly-commentary

General disclosure:This material is intended for information purposes only, and does not constitute investment advice, a recommendation or an offer or solicitation to purchase or sell any securities to any person in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. This material may contain estimates and forward-looking statements, which may include forecasts and do not represent a guarantee of future performance. This information is not intended to be complete or exhaustive and no representations or warranties, either express or implied, are made regarding the accuracy or completeness of the information contained herein. The opinions expressed are as of November 2024 and are subject to change without notice. Reliance upon information in this material is at the sole discretion of the reader. Investing involves risks.

In the US and Canada, this material is intended for public distribution. In the European Economic Area (EEA):this is Issued by BlackRock (Netherlands) B.V. is authorised and regulated by the Netherlands Authority for the Financial Markets. Registered office Amstelplein 1, 1096 HA, Amsterdam, Tel: 020 – 549 5200, Tel: 31-20-549-5200. Trade Register No. 17068311 For your protection telephone calls are usually recorded. In the UK and Non-European Economic Area (EEA) countries: this is Issued by BlackRock Investment Management (UK) Limited, authorised and regulated by the Financial Conduct Authority. Registered office: 12 Throgmorton Avenue, London, EC2N 2DL. Tel: + 44 (0)20 7743 3000. Registered in England and Wales No. 02020394. For your protection telephone calls are usually recorded. Please refer to the Financial Conduct Authority website for a list of authorised activities conducted by BlackRock. In Italy, for information on investor rights and how to raise complaints please go to https://www.blackrock.com/corporate/compliance/investor-right available in Italian. In Switzerland, for qualified investors in Switzerland: This document is marketing material. Until 31 December 2021, this document shall be exclusively made available to, and directed at, qualified investors as defined in the Swiss Collective Investment Schemes Act of 23 June 2006 (“CISA”), as amended. From 1 January 2022, this document shall be exclusively made available to, and directed at, qualified investors as defined in Article 10 (3) of the CISA of 23 June 2006, as amended, at the exclusion of qualified investors with an opting-out pursuant to Art. 5 (1) of the Swiss Federal Act on Financial Services (FinSA). For information on art. 8 / 9 Financial Services Act (FinSA) and on your client segmentation under art. 4 FinSA, please see the following website: www.blackrock.com/finsa. For investors in Israel: BlackRock Investment Management (UK) Limited is not licensed under Israel’s Regulation of Investment Advice, Investment Marketing and Portfolio Management Law, 5755-1995 (the “Advice Law”), nor does it carry insurance thereunder. In South Africa, please be advised that BlackRock Investment Management (UK) Limited is an authorized financial services provider with the South African Financial Services Board, FSP No. 43288. In the DIFC this material can be distributed in and from the Dubai International Financial Centre (DIFC) by BlackRock Advisors (UK) Limited — Dubai Branch which is regulated by the Dubai Financial Services Authority (DFSA). This material is only directed at 'Professional Clients’ and no other person should rely upon the information contained within it.Blackrock Advisors (UK) Limited - Dubai Branch is a DIFC Foreign Recognised Company registered with the DIFC Registrar of Companies (DIFC Registered Number 546), with its office at Unit 06/07, Level 1, Al Fattan Currency House, DIFC, PO Box 506661, Dubai, UAE, and is regulated by the DFSA to engage in the regulated activities of ‘Advising on Financial Products’ and ‘Arranging Deals in Investments’ in or from the DIFC, both of which are limited to units in a collective investment fund (DFSA Reference Number F000738). In the Kingdom of Saudi Arabia, issued in the Kingdom of Saudi Arabia (KSA) by BlackRock Saudi Arabia (BSA), authorised and regulated by the Capital Market Authority (CMA), License No. 18-192-30. Registered under the laws of KSA. Registered office: 7976 Salim Ibn Abi Bakr Shaikan St, 2223 West Umm Al Hamam District Riyadh, 12329 Riyadh, Kingdom of Saudi Arabia, Tel: +966 11 838 3600. CR No, 1010479419. The information contained within is intended strictly for Sophisticated Investors as defined in the CMA Implementing Regulations. Neither the CMA or any other authority or regulator located in KSA has approved this information. In the United Arab Emirates this material is only intended for -natural Qualified Investor as defined by the Securities and Commodities Authority (SCA) Chairman Decision No. 3/R.M. of 2017 concerning Promoting and Introducing Regulations. Neither the DFSA or any other authority or regulator located in the GCC or MENA region has approved this information. In the State of Kuwait, those who meet the description of a Professional Client as defined under the Kuwait Capital Markets Law and its Executive Bylaws. In the Sultanate of Oman, to sophisticated institutions who have experience in investing in local and international securities, are financially solvent and have knowledge of the risks associated with investing in securities. In Qatar, for distribution with pre-selected institutional investors or high net worth investors. In the Kingdom of Bahrain, to Central Bank of Bahrain (CBB) Category 1 or Category 2 licensed investment firms, CBB licensed banks or those who would meet the description of an Expert Investor or Accredited Investors as defined in the CBB Rulebook. The information contained in this document, does not constitute and should not be construed as an offer of, invitation, inducement or proposal to make an offer for, recommendation to apply for or an opinion or guidance on a financial product, service and/or strategy. In Singapore, this is issued by BlackRock (Singapore) Limited (Co. registration no. 200010143N). This advertisement or publication has not been reviewed by the Monetary Authority of Singapore. In Hong Kong, this material is issued by BlackRock Asset Management North Asia Limited and has not been reviewed by the Securities and Futures Commission of Hong Kong. In South Korea, this material is for distribution to the Qualified Professional Investors (as defined in the Financial Investment Services and Capital Market Act and its sub-regulations). In Taiwan, independently operated by BlackRock Investment Management (Taiwan) Limited. Address: 28F., No. 100, Songren Rd., Xinyi Dist., Taipei City 110, Taiwan. Tel: (02)23261600. In Japan, this is issued by BlackRock Japan. Co., Ltd. (Financial Instruments Business Operator: The Kanto Regional Financial Bureau. License No375, Association Memberships: Japan Investment Advisers Association, The Investment Trusts Association, Japan, Japan Securities Dealers Association, Type II Financial Instruments Firms Association) for Institutional Investors only. All strategies or products BLK Japan offer through the discretionary investment contracts or through investment trust funds do not guarantee the principal amount invested. The risks and costs of each strategy or product we offer cannot be indicated here because the financial instruments in which they are invested vary each strategy or product. In Australia, issued by BlackRock Investment Management (Australia) Limited ABN 13 006 165 975 AFSL 230 523 (BIMAL). The material provides general information only and does not take into account your individual objectives, financial situation, needs or circumstances. In New Zealand, issued by BlackRock Investment Management (Australia) Limited ABN 13 006 165 975, AFSL 230 523 (BIMAL) for the exclusive use of the recipient, who warrants by receipt of this material that they are a wholesale client as defined under the New Zealand Financial Advisers Act 2008. Refer to BIMAL’s Financial Services Guide on its website for more information. BIMAL is not licensed by a New Zealand regulator to provide ‘Financial Advice Service’ ‘Investment manager under an FMC offer’ or ‘Keeping, investing, administering, or managing money, securities, or investment portfolios on behalf of other persons’. BIMAL’s registration on the New Zealand register of financial service providers does not mean that BIMAL is subject to active regulation or oversight by a New Zealand regulator. In China, this material may not be distributed to individuals resident in the People’s Republic of China (“PRC”, for such purposes, excluding Hong Kong, Macau and Taiwan) or entities registered in the PRC unless such parties have received all the required PRC government approvals to participate in any investment or receive any investment advisory or investment management services. For Other APAC Countries, this material is issued for Institutional Investors only (or professional/sophisticated /qualified investors, as such term may apply in local jurisdictions). In Latin America, no securities regulator within Latin America has confirmed the accuracy of any information contained herein. The provision of investment management and investment advisory services is a regulated activity in Mexico thus is subject to strict rules. For more information on the Investment Advisory Services offered by BlackRock Mexico please refer to the Investment Services Guide available at www.blackrock.com/mx

©2024 BlackRock, Inc. All Rights Reserved. BLACKROCK is a trademark of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners.

Forum takeaways

Market-moving events can highlight structural shifts underway. Our investment leaders grapple with the implications of a world shaped by supply.

Market backdrop

US stocks soared last week, marking their largest weekly gain of the year. Small caps and banks led the way following President-elect Donald Trump’s victory.

Week ahead

This week, US CPI will help gauge if inflation is still falling toward the Fed’s 2% target. Recent PCE data indicates inflation will settle higher in the medium term.

We are in a world where multiple, starkly different outcomes are possible. The decisive US election outcome has stoked uncertainty about future US policy. At our 2025 Outlook Forum last week, BlackRock investment leaders met to discuss how to invest given large structural shifts happening now – and we updated the range of scenarios we considered feasible six months ago, reflecting our discussions on US exceptionalism, geopolitics and artificial intelligence (AI).

Paragraph-2,Image-1,Paragraph-3
Paragraph-4,Advance Static Table-1,Paragraph-5,Advance Static Table-2,Paragraph-6,Advance Static Table-3

Sensitive to surprises

Sensitivity of US 10-year yield to economic surprises, 2003-2024

The chart shows that 10-year US Treasury yields have swung sharply with key macro releases this year.

Past performance is no guarantee of future results. Source: BlackRock Investment Institute, with data from LSEG Datastream, October 2024. Notes: The line shows how sensitive the US 10-year Treasury yield is to economic surprises, using regression analysis to estimate the relationship between US 10-year Treasury yields and the Citi Economics Surprise Index over a rolling six-month window. This is only an estimate of the relationship between the 10-year Treasury yield and economic surprises.

Our Outlook Forum took place against the backdrop of a momentous US election. Markets welcomed the decisive result that took some near-term uncertainty off the table – even as medium-term policy uncertainty remains. Shifting narratives, from AI booms to recession fears, have driven volatility this year. Markets can overreact to these shifts. We have seen unusually sharp swings in 10-year US Treasury yields with key macro releases. See the chart. We think that reflects investors viewing new data and news through a business cycle lens when broader structural changes are at play. We have been nimble with our tactical view changes this year to lean against narrative-driven volatility. The goal of last week’s Forum: tracking the transformation driven by these structural changes. We evolved our macro scenarios to better understand and position for the transformation’s opportunities.

Structural forces at play

US exceptionalism – strong economic and corporate earnings growth – was a topic of debate at the Forum. Our portfolio managers are broadly positive on US equity markets. They noted this has more room to run, even if US stock valuations look steep. The contrast with lagging European economic growth, and stock performance, remains stark. Forum participants also spied a disconnect in Fed policy. The Fed cut its policy rate another 25 basis points last week as it sees inflation moving closer to its 2% target. Yet financial conditions are loose after a historically sharp tightening cycle. This unusual backdrop reinforces our view that this is not a typical business cycle – but rather an environment where structural forces are at play.

The geopolitical fragmentation mega force – or structural shift impacting returns now and in the future – ran through most discussions. The incoming US president takes office at a time of greater global fragility given wars in the Middle East and Ukraine, and ongoing tensions with China. A punishing year for incumbents around the globe is pressuring G7 partners. Germany is headed for a new election. This follows France's divided election outcome earlier this year. The reform proposals laid out by Mario Draghi detail the challenges Europe faces. China rolled out some details of its fiscal stimulus highlighting its weak growth near term – and also faces long-term challenges from an aging population. AI will increasingly take center stage in geopolitics, featuring heavily in US-China strategic tech competition. Under the Biden administration, the US has elevated AI to the core of its military and technological priorities.

The debate on the impact of the AI mega force keeps evolving. Much of the discussion at our last Forum in June centered on AI and its energy and investment needs. That was still a focus – and we generally agreed that the AI buildout can broaden to include other beneficiaries. Quantifying AI’s longer-term economic impact remains challenging, but we think AI has the potential to eventually reshape economies and boost economic growth.

Our bottom line

Our Forum discussion sought to clarify how structural shifts are driving the investment opportunities we see while assessing what’s in the price. We think having a solid framework is key for anchoring views in this unusual environment.

Market backdrop

US stocks soared to new all-time highs last week, notching their largest weekly gain of the year. Small caps and banks led the way as possible beneficiaries of a second Trump term. US 10-year Treasury yields finished around 4.30%, down slightly on the week after jumping to four-month highs. A telegraphed 25-basis point Fed rate cut failed to move markets. Pricing of future cuts has come closer to our view, yet we still see rates settling higher than markets do.

This week, we focus on US CPI to see if inflation will keep falling toward the Fed’s 2% target. Short-term inflation has been decreasing, with immigration boosting the labor supply and cooling wage growth. However, recent services PCE data remains sticky, indicating that inflation may settle above 2% in the medium term. Long-term, structural supply constraints – like a shrinking workforce due to population aging – are expected to keep inflation pressures persistent.

Week ahead

The chart shows that gold is the best performing asset year-to-date among a selected group of assets, while Brent crude is the worst.

Past performance is not a reliable indicator of current or future results. Indexes are unmanaged and do not account for fees. It is not possible to invest directly in an index. Sources: BlackRock Investment Institute, with data from LSEG Datastream as of Nov. 7, 2024. Notes: The two ends of the bars show the lowest and highest returns at any point year to date, and the dots represent current year-to-date returns. Emerging market (EM), high yield and global corporate investment grade (IG) returns are denominated in US dollars, and the rest in local currencies. Indexes or prices used are: spot Brent crude, ICE US Dollar Index (DXY), spot gold, MSCI Emerging Markets Index, MSCI Europe Index, LSEG Datastream 10-year benchmark government bond index (US, Germany and Italy), Bank of America Merrill Lynch Global High Yield Index, J.P. Morgan EMBI Index, Bank of America Merrill Lynch Global Broad Corporate Index and MSCI USA Index.

Nov. 12

UK employment data

Nov. 13

US core CPI

Nov. 15

UK GDP; Japan GDP

Read our past weekly commentaries here.

Big calls

Our highest conviction views on tactical (6-12 month) and strategic (long-term) horizons, November 2024

Note: Views are from a US dollar perspective, November 2024. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding any particular funds, strategy or security.

Tactical granular views

Six to 12-month tactical views on selected assets vs. broad global asset classes by level of conviction, November 2024

Legend Granular

Our approach is to first determine asset allocations based on our macro outlook – and what’s in the price. The table below reflects this. It leaves aside the opportunity for alpha, or the potential to generate above-benchmark returns. The new regime is not conducive to static exposures to broad asset classes, in our view, but it is creating more space for alpha. For example, the alpha opportunity in highly efficient DM equities markets historically has been low. That’s no longer the case, we think, thanks to greater volatility, macro uncertainty and dispersion of returns. The new regime puts a premium on insights and skill, in our view.

Past performance is not a reliable indicator of current or future results. It is not possible to invest directly in an index. The statements on alpha do not consider fees. Note: Views are from a US dollar perspective. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast or guarantee of future results. This information should not be relied upon as investment advice regarding any particular fund, strategy or security.

Euro-denominated tactical granular views

Six to 12-month tactical views on selected assets vs. broad global asset classes by level of conviction, November 2024

Legend Granular

Past performance is not a reliable indicator of current or future results. It is not possible to invest directly in an index. Note: Views are from a euro perspective, November 2024. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast or guarantee of future results. This information should not be relied upon as investment advice regarding any particular fund, strategy or security.

Meet the authors
Jean Boivin
Head – BlackRock Investment Institute
Wei Li
Global Chief Investment Strategist – BlackRock Investment Institute
Vivek Paul
Global Head of Portfolio Research – BlackRock Investment Institute
Ben Powell
Chief Investment Strategist for the Middle East and APAC — BlackRock Investment Institute

This material is for distribution to Professional Clients (as defined by the FCA Rules) and should not be relied upon by any other persons.

Issued by BlackRock Investment Management (UK) Limited, authorised and regulated by the Financial Conduct Authority. Registered office: 12 Throgmorton Avenue, London, EC2N 2DL. Tel: 020 7743 3000. Registered in England No. 2020394. For your protection telephone calls are usually recorded. BlackRock is a trading name of BlackRock Investment Management (UK) Limited.

Sources: Bloomberg unless otherwise specified.

Past performance is not a guide to future performance. The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested. Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time.

Any research in this document has been procured and may have been acted on by BlackRock for its own purpose. The results of such research are being made available only incidentally. The views expressed do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of any company in the BlackRock Group or any part thereof and no assurances are made as to their accuracy.

The opinions expressed in this paper may change as subsequent conditions vary. The information and opinions contained in this paper are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents.

This paper may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this paper is at the sole discretion of the reader.

This document is for information purposes only and does not constitute an offer or invitation to anyone to invest in any BlackRock funds and has not been prepared in connection with any such offer.

© 2024 BlackRock, Inc. All Rights reserved. BLACKROCK, BLACKROCK SOLUTIONS, iSHARES, BUILD ON BLACKROCK and SO WHAT DO I DO WITH MY MONEY logo are registered and unregistered trademarks of BlackRock, Inc. or its subsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners.