Weekly market commentary

Mar 2, 2026|

10 minute read|BlackRock Investment Institute

Transcript

Market take Weekly video_20260302 Devan Nathwani Portfolio Strategist, BlackRock Investment Institute Opening frame: What’s driving markets? Market take Camera frame Markets are being reshaped by multiple, intersecting mega forces. The scale – and direction – of their long-term impact isn’t clear: That’s why it’s crucial to revisit key calls and focus on underlying economic drivers over asset class labels, in our view. Title slide: Rethinking long-term investing 1: Markets in a cross current of mega forces Today, we see markets caught in a cross-current of mega forces. AI is front and center, with Nvidia’s quarterly results last week showing the AI buildout spending spree rolling on. At the same time, the software sector selloff marks a new focus on sorting out perceived AI losers. Geopolitical fragmentation also came into the spotlight as the U.S. tariff regime is again in transition. These forces have the potential to not only change the make-up of economies but even their trajectory. but no one knows the ultimate end state. We see several possible scenarios with very different return outcomes. For example, AI productivity gains could lead us to an unprecedented break out from a 2% trend rate of growth. This could also fail to materialize, and further geopolitical fragmentation could dampen global growth and drive up risk premia for U.S. assets. 2: Moving beyond static allocation We’ve evolved our capital market assumptions which are for professional investors only, to address this challenge. First, we revisit the biggest portfolio calls more often as new information arrives. Second, we focus on the fundamental economic drivers rather than asset class labels. Think of the AI buildout: it cuts across public and private market asset classes with opportunities in listed and private infrastructure as well as real estate and private equity. We need a more granular approach to portfolio construction to reflect where mega forces show up. Third, we budget risk holistically. We see dispersion rising as mega forces power transformation. That strengthens the case for treating alpha as an explicit allocation decision – not as an add-on. 3: Investment implications We have evolved our views on strategic horizons of 5 years or more. Today, our starting point scenario sees us favoring inflation-linked bonds as we expect inflation to rise due to the AI buildout – and settle above pre-pandemic levels. We see this buildout increasingly being financed through debt issuance resulting in wider credit spreads. Yet we lean into high yield credit as it has attractive income and is less sensitive to interest rate shifts. We also favor infrastructure. It lets investors play the AI theme without making a call on the winners of AI adoption. Outro: Here’s our Market take We lean into inflation linked bonds and high yield credit on a strategic horizon of 5 years or more. In private markets, we favor infrastructure which stands to benefit from rising AI adoption. Closing frame: Read details: blackrock.com/weekly-commentary

Rethinking long-term investing

A new approach to portfolio constructionStatic strategic asset allocation no longer suffices in a world shaped by mega forces. It’s crucial to revisit key calls and focus on underlying economic drivers.

Market backdropInvestors went risk-off on AI fears in February. The S&P 500 notched its worst month in nearly a year and yields on 10-year U.S. Treasuries fell below 4%.

Week aheadWe’re watching labor data this week. We expect U.S. February payrolls data to show a resilient labor market, reaffirming the Fed’s new hawkish tone.

Renewed conflict in the Middle East, the software selloff and Nvidia’s earnings show mega forces reshaping markets in real time. These mega forces are well known, yet the scale and even direction of their long-run impact is uncertain. With no one long-term scenario, it’s crucial to assess calls more often and focus on fundamental economic drivers over asset class labels. On a strategic horizon of five years or longer, we go overweight high yield credit and like infrastructure.

Download full commentary (PDF)

Leaning on scenariosIllustrative distribution of U.S. equity returns

Source:

For illustrative purposes only. Source: BlackRock Investment Institute, March 2026. Note: The illustration shows a hypothetical distribution of U.S. equity returns in the different scenarios underlying our capital market assumptions. Read more here; for professional investors only.

The cross-currents of mega forces are shaping markets – now and long term. Geopolitical fragmentation is front and center as conflict escalates in the Middle East. The AI buildout keeps rolling on, as seen in Nvidia’s earnings, and the selloff in software marks a new focus on perceived AI losers. At the same time, fiscal and inflation anchors have weakened. The long-run economy could arrive at structurally different regimes, each with very different return expectations. That makes any set of long-run capital market assumptions conditional: it reflects one assumed path for the economy. This led us to begin tracking multiple scenarios last year. See the chart. Our starting point assumes sticky inflation limits interest rate cuts. AI-related gains could spark a breakout from 2% trend growth. This could also fail to occur, and further geopolitical fragmentation could push up risk premium for U.S. assets.

We have evolved our capital market assumptions (CMAs – for professional investors only) and portfolio construction approach to address this bifurcation. Many of these changes align with the broader industry shift towards total portfolio approach (TPA), though TPA itself is loosely defined and can mean many different things in practice. First, we revisit major portfolio judgements more often and set an explicit Plan B grounded in scenarios, with clarity on the portfolio changes those scenarios require. We review our CMAs quarterly and began incorporating explicit alternate scenarios as of Q2 last year.

Focusing on fundamental economic drivers

Second, we focus on fundamental economic drivers rather than asset class labels. Why? Broad asset class benchmarks are a blunt instrument for expressing views in an era of transformation. Mega forces do not show up uniformly across markets: their effects land in specific sectors, parts of the yield curve and balance sheet structures. Portfolio construction needs more granularity to reflect this. So, we shift the unit of analysis. Instead, we measure exposures at the whole portfolio level based on economic and factor drivers of return and risk. This is key for private assets, where benchmarks are less standardized.

Third, we budget portfolio risk holistically. Economic transformation raises dispersion within asset classes. That strengthens the case for treating alpha as an allocation decision, not an add-on. This includes setting clear rules for sizing alpha versus beta risk, and defining where private markets and hedge funds can fit into the risk budget.

We update our strategic views of five years or longer in our starting point scenario. We think the AI buildout will boost inflation and widen credit spreads. Inflation-linked bonds can offset the former. And high yield bonds – less sensitive to interest rate shifts – can offset the latter, so we go overweight. We see fiscal pressures pushing up yields on developed market bonds, so we go neutral. We’re also neutral developed market equities but stay overweight emerging market stocks. We get selective in private credit as dispersion grows. And we like infrastructure given it benefits from multiple mega forces.

Our bottom line

Static, set-it-and-forget-it strategic asset allocation (SAA) doesn’t work in a world where mega forces make long-term outcomes uncertain. Our SAA approach revisits key decisions, focuses on underlying drivers and sets a risk budget.

Market backdrop

The S&P 500 saw its biggest monthly drop since March 2025. Nvidia’s earnings beat failed to soothe mounting market anxiety about AI disruption and higher-than-expected wholesale inflation data reinforced concerns about sticky inflation. U.S. 10-year Treasury yields fell below 4.00% as fretful investors retreated to defensive assets. Brent crude oil gained nearly 4% last week on concerns about further conflict in the Middle East before the weekend developments.

We’re watching labor market data and flash PMIs around the world. We expect February U.S. payrolls to show ongoing labor market resilience – keeping the Federal Reserve on hold in coming months. The market is still pricing in two quarter-point rate cuts by year end. In the euro area, the February flash inflation data are likely to reinforce expectations that the European Central Bank is also on hold.

Week ahead

March 2Global flash PMIs

March 3Euro area flash inflation; Japan unemployment

March 4Euro area unemployment

March 6U.S. payrolls; euro area revised

Source

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 February 26, 2026. 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 U.S. dollars, and the rest in local currencies. Indexes or prices used are: spot Brent crude, ICE U.S. Dollar Index (DXY), spot gold, spot bitcoin, MSCI Emerging Markets Index, MSCI Europe Index, LSEG Datastream 10-year benchmark government bond index (U.S., Germany and Italy), Bloomberg Global High Yield Index, J.P. Morgan EMBI Index, Bloomberg Global Corporate Index and MSCI USA Index.

Read our past weekly commentaries here.

Big calls

Our highest conviction views on six- to 12-month (tactical) and over five-year (strategic) horizons, March 2026

Source:

Note: Views are from a U.S. dollar perspective, March 2026. 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, March 2026

We have lengthened our tactical investment horizon back to six to 12 months. The table below reflects this and, importantly, leaves aside the opportunity for alpha, or the potential to generate above-benchmark returns – especially at a time of heightened volatility.

Source:

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 U.S. 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, March 2026

Source:

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, March 2026. 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.