The BlackRock Investment Institute (BII) has said the $9 trillion asset manager is ‘evolving its playbook’ in response to what it sees as a new macro regime.
According to this week’s market update from the BII, the firm now sees ‘different and abundant opportunities’ as the world comes to terms with tighter monetary policy.
Investors of all stripes, including the largest of asset managers, had become very accustomed to ultra-loose central bank policy since 2008, but the picture is now very different.
The BII’s stance is that investors need to make an adjustment rather than simply sit tight until rates come back down, with income now more of a priority.
“We see major central banks holding policy tight in the new macro regime,” the BII said. “That bolsters income’s appeal. We’re also pivoting to new opportunities, evolving our playbook to go granular across asset classes, regions and sectors.”
“Markets have come around to the view that major central banks will not quickly ease policy in a world shaped by supply constraints – notably worker shortages in the US – developed markets can no longer produce as much without sparking higher inflation,” the BII continued. “So, central banks are holding tight, [which is] the first new investment theme in our 2023 midyear outlook.”
‘Getting granular’ refers to being more specific on the asset types and weightings selected for portfolios.
The in-house macro think-tank said its latest market calls include optimism over the prospects for Japanese stocks due to fewer supply constraints, supportive policy and corporate reforms.
The firm said it now tactically prefers emerging market equities to developed peers as policy looks closer to easing in those regions.
The BII also believes investors should be ‘leaning into the digital disruption of AI.’
Private credit is another focus for BlackRock as the firm believes it is set for ‘a bigger role in the future of finance.’
