Our investment views
Our new investment playbook – both strategic and tactical – calls for greater granularity to capture opportunities arising from greater dispersion and volatility we anticipate in coming years.
Big calls
Our highest conviction views on tactical (6-12 month) and strategic (long-term) horizons, December 2023
| Asset | Strategic view | Tactical view | Commentary | |
|---|---|---|---|---|
| Equities | Developed market |  |
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We are neutral equities in our strategic views as high-for-longer interest rates lead us to re-evaluate our estimate for stock valuations from here. Tactically, we stay underweight DM stocks but upgrade Japan. We are underweight the U.S. and Europe. Corporate earnings expectations don’t fully reflect the economic stagnation we see. We see other opportunities in equities. |
| Emerging market | |
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Strategically, we are neutral as we don’t see significant earnings growth or higher compensation for risk. We go neutral tactically given a weaker growth trajectory. We prefer EM debt over equity. | |
| Developed market government bonds | Nominal | |
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Higher-for-longer policy rates have bolstered the case for short-dated government debt in portfolios on both tactical and strategic horizons. Strategically, we carve out an overweight for short- and medium-term bonds as yields have surged. We stay underweight U.S. and euro area long-dated bonds as we expect investors to demand more compensation for the risk of holding them. We are strategically neutral on government bonds overall. Tactically, we’re neutral long-term Treasuries as the yield surge driven by expected policy rates approaches a peak. We’re overweight euro area and UK bonds as we see more rate cuts than the market does. |
| Inflation-linked |  |
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We are strategically overweight DM inflation-linked bonds where we see higher inflation persisting. But we have trimmed our tactical view to neutral on current market pricing in the euro area. | |
| Public credit and emerging market debt | Investment grade |  |
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Strategically, we’re underweight due to limited compensation above short-dated government bonds. We’re underweight tactically to fund risk-taking elsewhere as spreads remain tight. |
| High yield | |
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Strategically, we are neutral high yield as we see the asset class as more vulnerable to recession risks. We’re tactically underweight. Spreads don’t fully compensate for slower growth and tighter credit conditions we expect. | |
| EM debt | |
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Strategically, we're neutral and see more attractive income opportunities elsewhere. Tactically, we’re overweight hard currency EM debt due to higher yields. It is also cushioned from weakening local currencies as EM central banks cut policy rates. | |
| Private markets | Income | |
- | We are strategically overweight private markets income. For investors with a long-term view, we see opportunities in private credit as private lenders help fill a void left by a bank pullback. |
| Growth | |
- | Even in our underweight to growth private markets, we see areas like infrastructure equity as a relative bright spot. |
Note: Views are from a U.S. dollar perspective, December 2023. 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, December 2023
| Asset | Tactical view | Commentary | ||
|---|---|---|---|---|
| Equities | ||||
| United States | |
We are underweight the broad market – still our largest portfolio allocation. We don’t think earnings expectations reflect the macro damage we expect. We recognize momentum is strong near-term. | ||
| Europe | |
We are underweight. The ECB keeps tightening in a slowdown and the support to growth from lower energy prices is fading. | ||
| U.K. | |
We are neutral. We find that attractive valuations better reflect the weak growth outlook and the Bank of England’s sharp rate hikes to deal with sticky inflation. | ||
| Japan | |
We are overweight. We think stronger growth can help earnings top expectations. Stock buybacks and other shareholder-friendly actions may keep attracting foreign investors. | ||
| Pacific ex-Japan | |
We are neutral. China’s restart is losing steam and we don’t see valuations compelling enough to turn overweight. | ||
| DM AI mega force | |
We are overweight. We see a multi-country and multi-sector AI-centered investment cycle unfolding set to support revenues and margins. | ||
| Emerging markets | |
We are neutral given a weaker growth trajectory. We prefer EM debt over equity. | ||
| China | |
We are neutral. Growth has slowed. Policy stimulus is not as large as in the past. Yet it should stabilize activity, and valuations have come down. Structural challenges imply deteriorating long-term growth. Geopolitical risks persist. | ||
| Fixed income | ||||
| Short U.S. Treasuries | |
We are overweight. We prefer short-term government bonds for income as interest rates stay higher for longer. | ||
| Long U.S. Treasuries | |
We are neutral. The yield surge driven by expected policy rates is approaching a peak. We now see about equal odds that long-term yields swing in either direction. | ||
| U.S. inflation-linked bonds | |
We are overweight and prefer the U.S. over the euro area. We see market pricing underestimating sticky inflation. | ||
| Euro area inflation-linked bonds | |
We prefer the U.S. over the euro area. We see markets overestimating how persistent inflation in the euro area will be relative to the U.S. | ||
| Euro area government bonds | |
We are overweight. Market pricing reflects policy rates staying higher for longer even as growth deteriorates. Widening peripheral bond spreads remain a risk. | ||
| UK Gilts | |
We are overweight. Gilt yields are holding near their highest in 15 years. Markets are pricing in restrictive Bank of England policy rates for longer than we expect. | ||
| Japan government bonds | |
We are underweight. We see upside risks to yields from the Bank of Japan winding down its ultra-loose policy. | ||
| China government bonds | |
We are neutral. Bonds are supported by looser policy. Yet we find yields more attractive in short-term DM paper. | ||
| Global investment grade credit | |
We are underweight. We take advantage of tight credit spreads to fund increased risk-taking elsewhere in the portfolio. We look to up the allocation if growth deteriorates. | ||
| U.S. agency MBS | |
We’re overweight. We see agency MBS as a high-quality exposure within diversified bond allocations. | ||
| Global high yield | |
We are underweight. Spreads do not fully compensate for slower growth and tighter credit conditions we anticipate. | ||
| Asia credit | |
We are neutral. We don’t find valuations compelling enough to turn more positive. | ||
| Emerging market - hard currency | |
We are overweight. We prefer emerging hard currency debt due to higher yields. It is also cushioned from weakening local currencies as EM central banks start to cut policy rates. | ||
| Emerging market - local currency | |
We are neutral. Yields have fallen closer to U.S. Treasury yields. Plus, central bank rate cuts could put downward pressure on EM currencies, dragging on potential returns. | ||
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, December 2023
| Asset | Tactical view | Commentary | ||
|---|---|---|---|---|
| Equities | ||||
| Europe ex UK | |
We are underweight. We see the European Central Bank holding policy tight in a slowdown and the support to growth from lower energy prices is fading. | ||
| Germany | |
We are underweight. Valuations are moderately supportive relative to peers, but we see earnings under pressure from higher interest rates, slower global growth and medium-term uncertainty on energy supply. Longer term, we think the low-carbon transition may bring opportunities. | ||
| France | |
We are underweight. Relatively richer valuations and a potential drag to earnings from weaker consumption amid higher interest rates offset the positive impact from past productivity enhancing reforms and favorable energy mix. | ||
| Italy | |
We are underweight. The economy’s relatively weak credit fundamentals amid global tightening financial conditions keep us cautious even though valuations and earnings revision trends look attractive versus peers. | ||
| Spain | |
We are underweight. Valuations and earnings momentum are supportive relative to peers, but the uncertain outcome of Spanish elections is a temporary headwind. | ||
| Netherlands | |
We are underweight. The Dutch stock markets' tilt to technology and semiconductors, a key beneficiary of higher demand for AI, is offset by relatively less favorable valuations and earnings momentum than European peers. | ||
| Switzerland | |
We are overweight. We hold a relative preference. The index’s high weights to defensive sectors like health care and non-discretionary consumer goods provide a cushion amid heightened global macro uncertainty. Valuations remain high versus peers and a strong currency is a drag on export competitiveness.. | ||
| UK | |
We are neutral. We find that attractive valuations better reflect the weak growth outlook and the Bank of England’s sharp rate hikes to deal with sticky inflation. | ||
| Fixed income | ||||
| Euro area government bonds | |
We are overweight core government bonds. Market pricing reflects policy rates staying higher for longer even as growth deteriorates. Widening peripheral bond spreads remain a risk. | ||
| German bunds | |
We are overweight. Market pricing reflects policy rates staying high for longer even as growth deteriorates. We hold a preference over Italian BTPs. | ||
| French OATs | |
We are overweight. Valuations look moderately compelling compared to peripheral bonds, with French spreads to German bonds hovering above historical averages. Elevated French public debt and a slower pace of structural reforms remain headwinds. | ||
| Italian BTPs | |
We are neutral. The spread over German Bunds looks tight amid deteriorating global macro, restrictive ECB policy and Italian fiscal policy back in the limelight / fiscal targets under pressure. Other domestic factors remain supportive, namely a more balanced current account. For now, we see income helping to compensate for the slightly wider spreads we expect. | ||
| UK gilts | |
We are overweight. Gilt yields are holding near their highest in 15 years. Markets are pricing in restrictive Bank of England policy rates for longer than we expect. | ||
| Swiss government bonds | |
We are overweight as the SNB approaches peak policy rates amid relatively subdued inflation in international comparison and a strong currency. Further upward pressure on yields appears limited given global macro uncertainty. | ||
| European inflation-linked bonds | |
We prefer the U.S. over the euro area. We see markets overestimating how persistent inflation in the euro area will be relative to the U.S. | ||
| European investment grade credit | |
We are neutral European investment-grade credit. Spreads have tightened vs. government bonds, and we now see less room for outperformance given weaker growth prospects amid restrictive monetary policy. We continue to prefer European investment grade over the U.S. given more attractive valuations amid decent income. | ||
| European high yield | |
We are neutral. We find the income potential attractive yet prefer up-in-quality exposures amid a worsening macro backdrop. | ||
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, December 2023. 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
Philipp Hildebrand
Vice Chairman, BlackRock
Jean Boivin
Head of BlackRock Investment Institute
Wei Li
Global Chief Investment Strategist, BlackRock Investment Institute
Alex Brazier
Deputy Head of BlackRock Investment Institute
Christopher Kaminker
Head of Sustainable Investment Research and Analytics, BlackRock Investment Institute
Vivek Paul
Head of Portfolio Research, BlackRock Investment Institute
