
Getting a grip on uncertainty
Investment themes
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01
Investing in the here and now
Immutable economic laws limit how fast global trade and capital markets can evolve, providing more certainty about the near-term macro outlook than the long term. That keeps us pro risk and overweight U.S. equities.
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02
Taking risk with no macro anchor
We believe this environment of transformation is better than the prior decade for achieving above-benchmark returns, or alpha. Yet the volatile macro environment injects risk into portfolios that needs to be actively managed or neutralized.
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03
Finding anchors in mega forces
Even with the loss of long-term macro anchors, we believe mega forces are durable return drivers. Yet mega forces don’t map into broad return drivers, and we get granular to track their evolution across and within asset classes. We like the AI theme.
Read details of our 2025 midyear outlook:
An evolving macro regime
Sharp U.S. policy shifts and elevated uncertainty make it seem the world is upended. What matters now for investors is getting a grip on this environment’s defining features. We have long argued that we entered a new macro regime marked by profound transformations, shaped by mega forces that could lead to many very different potential outcomes over time – for the trajectory and makeup of the global economy, inflation, government debt and deficits or global trade. 2025 has put this new regime into sharper relief, with serious discussion about the potential for fundamental changes to the structure of global markets.
Put another way, the loss of long-term macro anchors that have underpinned long-term asset allocation for decades is a defining feature of this new regime. But the global economy can’t be revamped overnight. Immutable economic laws – on global trade and debt financing – exist that policy cannot ignore in the near term. Attempts to break them are akin to trying to break laws of physics – and defy gravity – in our view.
Nobody knows where the macro environment is ultimately headed. But understanding these policy limits makes us more comfortable staying pro-risk on a tactical horizon.
Losing long-term macro anchors
Geopolitical fragmentation, AI and other mega forces are reshaping the trajectory and makeup of the global economy. This is not a cyclical adjustment but a structural one that can lead to many very different outcomes. Elevated uncertainty is a given. We start to get to grips with it by identifying a core feature of this environment: the loss of long-term macro anchors that markets have relied on for decades.
Inflation expectations are no longer firmly anchored near 2% targets. Fiscal discipline is ebbing away. The compensation investors want for holding long-term U.S. Treasuries is rising from suppressed levels. And confidence in institutional anchors – central bank independence and the haven role of U.S. assets – has been shaken.
We think that requires a new approach to risk taking. With long-run economic trajectories now ever-evolving, one would expect investors to search data for signals about where things are headed. This is exactly what we’ve seen. Equity returns have become more sensitive to short-term data as investors try to infer what it means about both the near and long term.
Questioning the future
Equity sensitivity to macro and trade uncertainty, 2004-2025
Source: BlackRock Investment Institute, June 2025. Note: Sensitivity represents the sum of the coefficients (absolute value) in the regression of weekly equity returns on the Citi Economic Surprise index, and Trade Policy Uncertainty index by Iacovello et al. (2020). All variables enter the regression as z-scores. Trade policy uncertainty index is available from 2015 at daily/weekly frequency and backfilled (assumed zero) in the previous years.
World can’t change quickly
Immutable economic laws on trade and debt are constraining U.S. policy shifts – and can help investors navigate near-term uncertainty. We believe we now have more certainty about the near-term macro outlook than the long – a big change from the past.
One law limiting trade policy: supply chains can’t be rewired quickly without major disruption. Companies can’t just source products and inputs from elsewhere overnight without a halt in activity. We believe that rule was behind the rapid tariff carve-outs — such as exemptions for electronics from China — and why the U.S. and China soon restarted trade talks.
The second law is on debt: U.S. debt sustainability relies on big, steady funding by foreign investors, who hold about a quarter of it. Any falloff in foreign demand for Treasuries could spike yields and make borrowing costs so high that it forces a policy response. We think the tariff pause soon after the April 2 announcement was likely partly due to the yield spike. We see a fragile equilibrium – elevated debt, sticky inflation and higher interest rates – making U.S. Treasuries vulnerable to investors seeing them as riskier.
Foreign funding needed
Ownership of U.S. Treasuries, 2000-2025
Source: BlackRock Investment Institute, U.S. Treasury, April 2025. Note: The chart shows foreign and domestic ownership of U.S. Treasury securities outstanding as a share of total U.S. Treasury securities outstanding.
Assessing the impact of escalating trade tensions

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.