BlackRock's market outlook for advisors

00:00

I'm Carolyn Barnette here with your advisor outlook update for March 2025. The top questions we're hearing from advisors this month center around, first, what tariffs might mean for their portfolios. Second, what's happening with international equities. And third how to think about inflation and fed policy. Let's talk about all three and what they might mean for advisor portfolios.

00:23

First, tariffs- tariffs are mentioned in the news 40,000 times in the first week of February alone. And they were discussed on 44% of U.S. earnings calls this quarter. While the details are still in flux, it's clear that tariffs could have an impact on investment strategy. But do they need to necessarily impact a broad asset allocation?

00:44

Possibly not, since the impact of tariffs might be felt more on individual companies and specifically those with international suppliers. Autos have thus far been the most impacted industry from a performance perspective, while financials have been relatively immune. There might be opportunities for skilled active managers to take advantage of dispersion here.

01:10

Interestingly enough, on the second question, at what may have been a time of peak U.S. versus rest of world bullishness, international equities have rallied to start the year outperforming U.S. equities by a large amount.

01:23

There are a few reasons behind this. Earnings estimates out of Europe have surprise to the upside beating very low, well actually negative, growth expectations. But we've also seen forward earnings estimates get revised up in Europe. And many expect a ceasefire in Ukraine to positively impact European equities. We've also seen enthusiasm around technology boost Chinese stocks, which has boosted the performance of broader emerging markets as well.

01:50

On the last question, bonds, inflation and the fed, we did see January CPI come in higher than expected, reigniting concerns on just when and how much the Federal Reserve might be able to cut interest rates.

02:03

Part of January's price rise could be the January effect, that is, that many companies reprice annually in January. But between that and concerns about whether policy changes could have additional inflationary impacts. It doesn't appear likely that we'll see cuts from the Federal Reserve any time soon.

02:22

So to sum it all up, what we're seeing into the three key themes for portfolio builders in March, here are three things to consider. First, earnings have broadly surprised to the upside, both in the U.S. and abroad. This keeps us comfortable overweighting stocks over bonds. But we are slightly moderating that overweight, given the uncertainty around trade policy and how higher interest rates could slow future growth.

02:47

Tariffs have been incredibly newsworthy, but we believe they'll have more of an impact at the micro level than the macro level. Barring a surprise in the magnitude of the policy, we do believe that heightened dispersion resulting from potential policy could create opportunity across countries and sectors, and could also justify an increase in exposure to active strategies that can be nimble around security selection.

03:11

Last, we believe that the Federal Reserve could keep interest rates high through the summer, which may suggest adjusting your approach to diversification. We're still seeing a lot of risk in longer term treasuries, and instead prefer leaning into shorter duration plus sectors for income and diversifying alternatives for their low correlation to equities. Check out the Full Advisor Outlook deck for more of our best thinking, and if you have any questions or want to talk about what any of these ideas mean for you, please reach out to your local Blackrock Market team. Or you can call 877-ASK-1BLK.

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