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2020 Global Outlook

Investment views

The first step in our tactical asset allocation process is to systematically identify the current macro regime and think through potential regime changes. This is important because different regimes have different implications for asset returns. The coronavirus shock does not fall into any of the standard regimes that inform our framework. It is more akin to a natural disaster that brings the economy to a near standstill, with a sharp contraction in activity. See the graphic below. Our base case is that a recovery should take hold after a sharp, deep downturn in the second quarter. This assumes a decisive, pre-emptive and coordinated policy response that stabilizes financial markets. We see early signs of such a policy response taking shape.

A major macro shock, not a macro regime change

A major macro shock, not a macro regime change

Source: BlackRock Investment Institute. Note: For illustrative purposes only. The opinions expressed are subject to change at any time due to changes in market or economic conditions.

Our conclusion on the dominant macro regime informs our tactical (six to 12-month) views. The other key input: estimating the extent to which the current macro backdrop is priced into markets. This can help identify dislocations between fundamentals and market pricing, potentially leading to tactical opportunities.

This integrated view of macro fundamentals and market pricing is further informed by synthesizing technical indicators and inputs from BlackRock experts. It leads us to overall views on global equities, credit, government bonds and cash. We employ a similar process to arrive at more granular views within asset classes and across regions and equity style factors. We scale these views according to our level of conviction.

Our directional views show our relative preferences across broad, global asset classes and where we think they are headed over the next six to 12-months.

Our directional views show our relative preferences across broad, global asset classes and where we think they are headed over the next six to 12-months. The bars show our level of conviction.

Directional views
Tactical views on major global assets from a U.S. dollar perspective, March 2020

Directional View

 

Note: 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.

Our granular views indicate how we think individual assets will perform against broad asset classes. We indicate different levels of conviction.

Granular views
Tactical views on selected assets vs. broad asset classes by level of conviction, March 2020

Granular View

 

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.

Meet the authors
Philipp Hildebrand
Vice Chairman
Philipp Hildebrand, Vice Chairman of BlackRock, is a member of the firm's Global Executive Committee. He is also Chairman of the Financial Markets Advisory (FMA
Jean Boivin
Head of BlackRock Investment Institute
Jean Boivin, PhD, Managing Director, is the Head of the BlackRock Investment Institute (BII). The institute leverages BlackRock’s expertise and produces proprietary ...
Elga Bartsch
Head of Macro Research, BlackRock Investment Institute
Elga Bartsch, PhD, Managing Director, heads up economic and markets research at the Blackrock Investment Institute (BII). BII provides connectivity between BlackRock's ...
Mike Pyle
Chief Investment Strategist, BlackRock Investment Institute
Mike Pyle, CFA, Managing Director, is Global Chief Investment Strategist for BlackRock, leading the Investment Strategy function within the BlackRock Investment Institute ...
Scott Thiel
Chief Fixed Income Strategist, BlackRock Investment Institute
Scott Thiel, Managing Director, is Chief Fixed Income Strategist for BlackRock and a member of the BlackRock Investment Institute (BII). He is responsible for developing ...