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Should markets take note of cyberattacks?
TOP LINE
Cyberattacks by state and non-state actors have increased in sophistication and quantity. We see a persistent risk of attacks on business-critical infrastructure and major elections — and would worry particularly about a nation state attacking the U.S.
Reason for concern
Increased internet-connected devices and availability of open source code have lowered the barriers to entry for cyber actors, leading to increased attacks. Cyberattacks are increasingly becoming part of the arsenal of nation states. For example, North Korea’s cyber capabilities are growing in scale and sophistication.
Reason for concern
Many companies have witnessed sharp share price declines after disclosing cyberattacks in recent years. Attacks have typically targeted companies with large amounts of personal data.
Impact of cyberattacks on companies
Chatter down, risk up
Market talk of cyberattacks has edged down, making the potential market impact bigger.
BlackRock Geopolitical Risk Indicator
SOURCES

Sources: BlackRock Investment Institute, with data from Thomson Reuters. Data as of December 14, 2018. Notes: We identify specific words related to this geopolitical risk and use text analysis to calculate the frequency of their appearance in the Thomson Reuters Broker Report and Dow Jones Global Newswire databases as well as on Twitter. We then adjust for whether the language reflects positive or negative sentiment, and assign a score. A zero score represents the average BGRI level over its history from 2003 up to that point in time. A score of one means the BGRI level is one standard deviation above the average. We weigh recent readings more heavily in calculating the average. The BGRI’s risk scenario is for illustrative purposes only and does not reflect all possible outcomes as geopolitical risks are ever-evolving.

BOTTOM LINE
We find limited market attention to the rising risk of major cyberattack, indicating its occurrence could have a high impact on global equities. Potential market implications of cyberattacks could include a selloff in global risk assets as investors flee to perceived safe haven assets. At-risk industries include utilities, energy and defense companies.
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Should markets take note of cyberattacks?

This story originally appeared in
BlackRock Geopolitical Risk Dashboard on December 7, 2018

Should markets take note of cyberattacks?

Keep a cool head in the risk rally
Risk appetite has rebounded in 2019. We remain modestly and selectively overweight equities – and moderately pro-risk in general – but would caution against expectations for the early-2019 rally to roar on.
Global equities return and earnings revisions ratio, 2014-2019
Global equities return and earnings revisions ratio, 2014-2019
SOURCES

Past performance is not a reliable indicator of current or future results. It is not possible to invest directly in an index. Sources: BlackRock Investment Institute, with data from MSCI and Thomson Reuters, March 2019. Notes: We use the MSCI ACWI Index to represent global equities. Return refers to the total return of the index in U.S. dollars, rebased to 100 at the start of 2014. Earnings revisions ratio refers to a three-month moving average of the number of analyst earnings upgrades relative to the numbers of downgrades over a month.

Keep a cool head in the risk rally

U.S. recession? Not quite
We see a slowdown in global growth and corporate earnings in 2019 as the U.S. economy approaches a late-cycle phase. We don’t see a recession as near, but growing economic and market uncertainty means investors may want to position portfolios accordingly.
Building a resilient portfolio is about more than dialing down risk. Taking risk in select areas can help investors achieve long-term goals.
USMV
Made from a mix of U.S. stocks that demonstrate lower risk, to help reduce volatility from market swings.

U.S. recession? Not quite

Lower your
investment fees
Investors who are looking to lower fees in their portfolio, or get started at a low cost, may want to consider broad index exchange traded funds (ETFs).
While stocks, bonds and commodities have been around for centuries, index funds have revolutionized how investors access these assets.
AGG
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Set a target for
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People are living longer, which means they need their retirement savings to last longer, too. Starting early and understanding the different ways to save can help investors build a retirement plan with confidence.
The investment needs of your retirement plan will likely change over time. No matter where you are in life, find a plan that matches your goals and tolerance for risk.
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These target date funds are professionally managed portfolios of diversified investments that adjust over time.

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USMV

58.22

Net Asset Value ($)

11.12

Total Returns (%)

AGG

107.61

Net Asset Value ($)

1.76

Total Returns (%)

SDG

58.56

Net Asset Value ($)

10.40

Total Returns (%)