2020 Global Outlook

Resilience rules

The valuations of developed government bonds look stretched in light of our economic outlook, but we still see them providing diversification – albeit less so with some yields near levels we consider to be their lower bounds. Quality equities and a focus on sustainability also can provide portfolio resilience.

Implication: We prefer U.S. Treasuries to lower-yielding peers as portfolio ballast and see a strong case for integrating sustainability into investment processes.

Why we favor U.S. equities
Relative weight in global equity quality index by country/region, 2020

Relative weight in global equity quality index by country/region, 2020
  • BlackRock Investment Institute with data from MSCI as of April 7, 2020. Notes: The bars show the weights of the regional markets in the MSCI ACWI Quality Index minus those on the MSCI ACWI Index. Indexes are unmanaged. You cannot invest directly in an index.

  • We like U.S. equities for the relatively high concentration of quality companies, as seen in the chart above. In addition, the country’s overwhelming policy support outweighs the scale seen in many other developed economies.
  • Coronavirus-driven uncertainty has spurred higher implied volatility across asset classes. Central bank actions have helped tame fixed income markets, yet equity volatility remains elevated despite retreating from recent highs.
  • The valuations of developed government bonds look stretched in light of our economic outlook, but we still see them providing diversification – albeit less so with some yields near levels we consider to be their lower bounds. The recent bounce in Treasury yields off record lows illustrates the risk of snapbacks.
  • A focus on sustainability can help make portfolios more resilient. We see funds flowing into sustainable assets for decades, rewarding sustainable investing strategies. See Sustainability: The tectonic shift in investing. Investors rebalancing portfolios after the risk asset selloff may consider leaning into such exposures.

Bottom line: We prefer U.S. Treasuries to lower-yielding peers as portfolio ballast and see a strong case for integrating sustainability into investment processes.

Meet the authors
Philipp Hildebrand
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
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
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 ...
Scott Thiel
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 ...