BlackRock Investment Institute Videos

Market take

Weekly video_20250414

Wei Li

Global Chief Investment Strategist, BlackRock

Opening frame: What’s driving markets? Market take

Camera frame

Three points on how I'm thinking about markets right now.

Title slide: Our take on the U.S. tariff pause

1: Establishing guardrails

There's a huge amount of policy uncertainty right now. In fact, it has been impossible to predict policy. We find it more rewarding to establish guardrails, to try to understand what could potentially prompt the [U.S.] administration to potentially change the course of policy making.

It seems to take some account of market volatility, financial risks and pushback from other sources, as well as a country's willingness to engage.

We think that can put a check on its maximal stance, and we also think that eases the risks of a near-term financial accident.

2: Three tariff types

The first type is tariffs on specific sectors to support reshoring of activities. We already had the 25% [tariff] on autos and parts and steel and aluminum. And likely coming up next are semiconductors, pharmaceuticals, copper and lumber. The second type is a bit of a universal 10% to generate revenue for the government that it really needs.

And the third type is country-specific negotiations with countries that have [a] goods surplus with the U.S., and [it’s] likely intended to provide leverage to try to bring down trade imbalance.

3: Extending our tactical horizon

We have been saying that in the near term, because of policy uncertainty, risk assets are likely going to come under pressure and over the longer term, fundamentals should prevail. And [we] were more positive over the six-to-12-month horizon. After April 2, huge amount of policy uncertainty aside, what really worried us was that there didn't seem to be checks on the maximal policy making stance from the U.S. administration, which made us think that we couldn't really see that much further ahead.

And we shortened the technical investment horizon from 6 to 12 months to three months, putting more emphasis on the near-term hunkering down. And at the time we said that we didn't know how long or how short this period would be. Then fast forward to last week, where my biggest takeaway is that there were tracks, after all, on the maximal policy making stance from the U.S. administration.

And yes, of course, looking ahead, there is going to be so much uncertainty, volatility, policy headlines flying around. But the fact that the checks exist gave us confidence to resume the 6–12-month horizon of tactical investing, where we are more positive.

Outro: Here’s our Market take

Currently we’re modestly positive on U.S. equities, especially after the year-to-date drawdown.

And we're modestly positive on Japanese equities on a currency unhedged basis. We are selectively in favor of sectoral opportunities like banks in Europe. We are underweight in [long-term] U.S. treasuries. They are supposed to behave like safe haven assets, and they really haven't been in this new regime of high debt and inflationary pressure. And in fact, gold has been a better diversifier in this new environment for portfolios.

Closing frame: Read details: blackrock.com/weekly-commentary

BlackRock Bottom Line: 2024 Global outlook

Speaker: Wei Li, Global Chief Investment Strategist, BlackRock Investment Institute

Script:

Higher interest rates and greater volatility define the new regime we’re in. In turn, that’s creating greater dispersion of returns.

We think investors will benefit from taking a more active approach to portfolios as we head into next year. 

Here’s our three investment themes for 2024: number one, managing macro risk; number two, steering portfolio outcomes; and number three, harnessing mega forces.

BlackRock Bottom Line open

Title: BlackRock Investment Institute 2024 global outlook

Our first theme is managing macro risk. Production constraints mean central banks face tougher trade-offs between inflation and growth – they can’t respond to faltering growth like before. This leads to a wider set of outcomes and a more uncertain macro outlook.

We don’t think investors should wait for the macro environment to improve. Instead, they should look to neutralize macro exposures or be very deliberate about which risks they take.

Our second theme is steering portfolio outcomes. We believe the new regime rewards an active approach to portfolios. Greater volatility and dispersion of returns create space for investment expertise to shine – that involves being more dynamic with indexing and alpha-seeking strategies, while staying selective.

Our third theme is harnessing mega forces. We see five structural shifts reshaping markets and driving returns now and in the future. We think they have become important portfolio building blocks on their own.

The bottom line is: Going into 2024 in the new regime, we want to put money to work. We believe investors should take a more active approach to their portfolios and be deliberate in taking portfolio risk.