Hi, I'm Tushar Yadava, and I'm here to give you a quick update on the latest changes to our asset allocation views from the BlackRock Model Portfolios, and why we believe they make sense in the current market environment.
First off, we’re increasing an overweight to stocks
(on screen: Consider adding to stocks, adding to US, and EM from developed non-US)
We’ve nudged our market risk higher, adding to equities and positioning the portfolio overweight stocks relative to bonds especially in the US, while also adding to EM relative to DM ex-US.
Why? The US market continues to deliver robust earnings and sales growth, despite concerns about valuations, we believe profitability and growth trajectories, and their consistency, especially among the large caps, alleviates any concerns – for now.
Secondly, we’re focusing on refreshing our style and factor tilts
(on screen: Lean into momentum, lighten the overweight to Quality and Growth > Value)
Within the US we think it could be a good time to moderate any growth/value imbalances, but we still believe the slightest of growth overweights is justified. Finally we view slices of quality that may be underweight the Mag 7 and overweight struggling consumers as areas to consider trimming, and reallocating towards factors like momentum that are obviously working with the current market dynamic.
Finally, bond valuations - where there is the least room to maneuver, should emphasize quality
(on screen: Consider bonds with value and quality screens)
While we’re leaning into upside opportunities in stocks, we’re equally focused on maintaining discipline where signals are less clear. The credit market is where we see perfection already in the price. We believe spreads are unlikely to ever go negative, meaning the upside is capped – so we are aggressively underweight fixed income. In areas where we hold credit, we look at strategies that can screen for less expensive bonds with potentially higher quality, and systematically rotate through that notoriously difficult market with efficiency.
For more information, please check out our latest moves on the advisor center, or reach out to your BlackRock market teams. Thanks for watching.
