BlackRock has determined it can no longer rely on a single base case when planning for long-term investment, as sweeping structural shifts have made economic outcomes harder to predict.
The world’s largest asset manager identified mega forces, such as AI, geopolitical fragmentation, demographic divergence, low-carbon economy transitions and the transformation of global finance, as the primary drivers of an “economic transformation with an unknown end”.
“We won’t have answers for some time to big questions about the future shape of the world, making long-term investing more challenging,” the firm’s latest weekly commentary stated.
BlackRock stated this transformation means traditional macro anchors, like stable growth and low inflation, no longer hold as strategic outcomes, becoming “less predictable because investors can no longer assume returns will converge to historical averages”.
“That’s why we’ve evolved our approach to now assess scenarios instead of one base case,” BlackRock said.
As a result, the firm has developed multiple sets of long-run capital market assumptions to help adjust portfolios quickly as the future has come into view.
One upside scenario envisioned “faster-than-expected AI adoption” that has spurred a broad productivity boost, unlocking higher growth and softer inflation.
In such a case, equities have been expected to deliver strong gains, with US markets leading due to AI dominance and robust earnings growth.
Meanwhile, a downside scenario involves the failure of tariff negotiations, declining trust in US institutions and investors demanding more compensation for their risk in financing US corporates.
However, BlackRock emphasised that, despite the uncertainty, “immutable laws – like supply chains can’t rewire overnight – mean the world can’t change quickly”.
Its current starting point scenario “largely reflects today’s world”, with US assets remaining core to portfolios, inflation staying above central bank targets, global growth dipping below pre-pandemic trends, and investors seeking more term premium to hold long-term government bonds.
BlackRock has also maintained a strong conviction in private markets, particularly in private credit and infrastructure, as a way to capture opportunities arising from mega forces. These assets are “a cornerstone – not an add-on – in all scenarios, but the mix varies.”
The firm further noted the current investment environment is being shaped by record levels of technology spending in the US, with the surge in software and IT investment in the second quarter “even larger than during the 1990s tech boom”.
BlackRock said this underscores AI’s growing macroeconomic impact, even as “tariffs threaten growth”.
“Mega forces are driving a transformation with an unknown end – changing strategic investing,” BlackRock said. “We consider scenarios to help us adapt quickly but see private markets helping investors benefit from mega forces across outcomes.”
