Global Allocation Insight

Fast forward to the future

June 16, 2020

While some industries will be thwarted,
others will be thrust ahead.

It’s hard to imagine a more rapid and devastating blow to U.S. households than this pandemic. The abrupt stifling of economic activity sent unemployment soaring to levels not seen since World War II, and it could take years to reverse the damage. Yet household consumption has been surprisingly resilient. We attribute this mainly to two factors: the astounding level of government stimulus and the relatively healthy state of household wealth heading into the pandemic.

Apart from the overall level of household consumption, equally important is the shift in consumer behaviors. How consumers have changed their spending habits is one of the many ways the pandemic is accelerating pre-existing trends, meaning parts of the future are arriving faster than expected.

U.S. households are now purchasing roughly 60% of the goods and services they consume online (versus 50% in 2019), and this pattern has been holding even as lockdown restrictions are being lifted. This is one of the reasons technology companies’ earnings and cash flows held up remarkably well throughout the market downturn relative to other sectors. In addition to household demand, there is also growing business demand. A recent poll of CEOs of Fortune 500 companies found that 75% of companies believe that the pandemic will accelerate technological transformation which may result in increased technology spending.*

As individuals are gradually resuming their usual activities, it is becoming clear that many habits engendered by the crisis are likely to prove long lasting. Most notably, consumers are likely to continue spending more of their time – and money – online.

We believe the societal changes before us are likely to drive faster growth than previously anticipated in a number of industries such as on-line retail, communications, cyber security and cloud computing. Meanwhile, other areas such as energy companies, brick and mortar retail, and auto part manufacturers may continue to face pressure from structural challenges.

We emphasize these secular themes in the BlackRock Global Allocation Fund through exposure to high quality equities in technology, healthcare, communication services and consumer discretionary, while we remain cautious on deep value-oriented sectors, primarily financials and energy. The fund’s equity positioning is augmented by exposure to investment grade and high yield credit, select emerging market sovereigns and securitized debt. We manage these risks with interest rate hedges, cash and gold-related securities.

Rick Rieder
Chief Investment Officer of Global Fixed Income and Head of the Global Allocation Team
Russ Koesterich, CFA, JD
Portfolio Manager,
BlackRock Global Allocation Team
Russ Koesterich, CFA, JD, Managing Director and portfolio manager, is a member of the Global Allocation team.   Mr. Koesterich's service with the firm dates back to 2005, ...
David Clayton, CFA, JD
Portfolio Manager,
BlackRock Global Allocation Team
David Clayton, CFA, JD, Managing Director and portfolio manager, is a member of the Global Allocation team.   Mr. Clayton joined the BlackRock Global Allocation team in ...
Kate Moore
Head of Thematic Strategy,
BlackRock Global Allocation Team
Kate Moore, Managing Director, is a member of the Global Allocation investment team and Head of Thematic Strategy. Her investment mandate includes identifying ...

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