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BLACKROCK Q2 2024 OUTLOOK PACKAGE

Grabbing the wheel: putting money to work.

What matters in the new regime of greater market and macro volatility: sticky inflation and structurally higher interest rates. We think it’s time to grab the investing wheel and seize the opportunities the new regime has on offer.

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Investment themes

01

Managing macro risk

What matters in the new regime: sticky inflation and structurally higher interest rates. Markets are still adjusting to this environment – and that’s why context is key in managing macro risk.

02

Steering portfolio outcomes

We think investors need to grab the investment wheel and take a more dynamic approach to their portfolios with both indexing and alpha-seeking strategies while staying selective.

03

Harnessing mega forces

Mega forces are another way to steer portfolios – and think about portfolio building blocks that transcend traditional asset classes, in our view.

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or financial product or to adopt any investment strategy. The opinions expressed are as of March 2024 and may change as subsequent conditions vary.

Discover our key themes and Outlook for Q2 2024

Karim Chedid: Welcome to our Q2 Outlook. We see further room to run for market optimism in Q2, as inflation cools and DM central banks move towards rate cuts, but we stay nimble and selective faced with greater macro volatility in the new regime. I'm joined by Natalie Gill from the BlackRock Investment Institute's portfolio research team to look at our key investment themes for Q2 and what they mean for portfolios.

Natalie Gill: Thanks, Karim. 

At the start of the year, we laid out three investment themes. I'll now run through how they've evolved as they continue to guide our outlook for Q2. Our first theme is managing macro risk. We've said before this new regime is marked by persistent structural inflation pressures. And the year to date volatility in inflation data is a case in point.
We think US inflation can fall further this year, yet we see it on a roller coaster rising back up in 2025. We see Fed policy rates staying higher than before the pandemic, as inflation likely settles closer to 3%. We expect eurozone inflation to eventually fall back to target but risks remain.
Amid a more uncertain macro outlook, exposures to macro risks can be punished as well as rewarded. So we think investors should be deliberate about which exposures they take. That calls for staying nimble in portfolios.
And our second theme is steering portfolio outcomes. We think upbeat equity market sentiment this year can persist as inflation keeps falling, and we stay nimble with duration. We're overweight US stocks and lean into the AI theme as tech drives corporate earnings growth. Market is still adjusting to the new regime of tighter financial conditions and more macro uncertainty. We see this in markets through greater volatility and dispersion of returns. This opens opportunities for getting more active in portfolios. Active returns can be generated in different ways, whether seeking out top performing managers or being dynamic with index strategies.
Another way to steer our portfolios is a third theme, harnessing mega forces, the big structural changes that affect investing now and far into the future, such as demographics and the low carbon transition. They change the long-term growth and inflation outlook and are poised to create big shifts in profitability across economies and sectors. This creates opportunities and risks for investors in our view.

Karim Chedid: Thanks, Natalie. 

So what does this mean for portfolios? We are managing macro risk by putting quality at the core of portfolios. We look to the quality factor, with a preference for Europe on a regional level. We're also building exposure to quality companies through high conviction, unconstrained equity strategies, which may be able to deliver alpha across market cycles. With interest rates set to fall this year, we look to diversify income sources beyond government bonds to quality dividend exposures. We believe an active approach here, including through systematic strategies wrapped in ETFs, can help in constructing an equity income portfolio that maintains high yields while avoiding style and sector bias.We also look at strategies that lock in yields in fixed income through fixed maturity bonds, turning to our second theme. 
We're steering portfolio outcomes by getting more active with high conviction allocations to US and Japanese equities in developed markets, as well as credit where we look to euro exposures in both investment grade and high yield. We look to add cyclicality where it makes sense, including through allocation to the global financial sector. And in EM assets, we favor Latin American equities for their commodity exporter tilt and introduce a constructive view on Indian government bonds.
Finally, we're also steering portfolios through exposure to mega forces. We maintain our high overweight to artificial intelligence where we cautiously begin to look up this stock, although we think semiconductors remain the purest expression of the theme.
We look to exposures like US banks and energy which could benefit in an election year, as well as assets that may benefit from changing demographics like health care and automation. Thank you for joining and click the link below to read our full views and our outlook.

Karim Chedid, Head of EMEA iShares Investment Strategy and Natalie Gill, Portfolio Research team, BlackRock Investment Institute break down our key themes and Outlook for Q2 2024

Discover our key themes for the Q2 2024 Global Outlook

Read the latest views from BII across asset classes, as we take stock of recent events and their potential implications for tactical and strategic allocations.
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How to implement our investment ideas in your portfolio

Download the Q2 2024 EMEA Implementation Guide

Explore our implementation ideas and look at how investors could position, with an outcome-orientated approach to the key investment themes laid out in the BlackRock Investment Institute’s Q2 2024 Global Outlook.
Q2 2024 EMEA Implementation Guide

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Discover how BlackRock’s products could help you adjust your portfolio to a new world of heightened macro volatility. Navigate our range of iShares and BlackRock funds.

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