Even as the big-picture economic landscape shifts, BlackRock is still relying on economic truths that don’t change – truths that, it said, are shaping its short-term investment strategy.
In its latest weekly market commentary, BlackRock said as long as long-term anchors weaken, it will find new ones in mega forces and lean more on its short-term views as immutable economic laws limit the pace of change.
“Big policy shifts seem to have upended the world this year – but our 2025 Midyear Outlook puts them in perspective. We think immutable economic laws on global trade and US debt limit how quickly the world can change,” the world’s largest asset manager said.
While it does forecast macro anchors will weaken long-term, BlackRock said it believes mega forces like artificial intelligence provide a new anchor.
“These two core features of this environment keep us risk on and overweight US equities,” it said, adding that it is taking an active approach across asset classes.
Delving into recent policy shifts, BlackRock acknowledged that “as unusual as this year has seemed”, it is simply a more “acute manifestation of the profound transformation underway for a few years now”.
“Long-term macro anchors markets have relied on for decades, like stable inflation and fiscal discipline, have weakened,” it said, adding that that does not mean investors should trim risk taking.
“Mega forces offer a new anchor for returns. And we see immutable economic laws limiting policy shifts and narrowing near-term outcomes: supply chains can’t be rewired overnight and US debt sustainability relies on large foreign funding. So, we’re Investing in the here and now – and putting more weight on our short-term views”.
Ultimately, BlackRock believes “today’s economic set-up” still favours US outperformance.
“European stocks have bested US peers many times since 2000, including early this year, but it’s always faded. See the chart,” it said. “We think Europe needs to advance its structural reforms to change that.”
Highlighting its decision in April to shift to neutral on US equities for a brief few days, BlackRock said it was the recognition that immutable economic laws prevent fast deviation from the status quo that allowed the fund manager to quickly dial risk back up.
“And we now see even more cause to stay risk on and overweight US equities,” it said, adding that tax and regulatory reforms in the country are expected to “boost investor sentiment”.
“We see scope for overall corporate earnings to stay solid even if US growth is dented by tariff-induced disruptions and corporate caution.”
More broadly, BlackRock said “set-and-forget” portfolios no longer serve investors well.
“We find other ways of taking risk with no macro anchor. They include relative value – or positioning for prices of different securities to converge or diverge – liquidity, regulation and positioning risk.
“Another way we inform our risk-taking is by finding anchors in mega forces. We believe they will be durable drivers of returns in both the near and long term.”
On the latter, the wealth manager said – given that, unlike macro anchors, mega forces don’t provide a clear handle on growth and inflation outlook – their evolution needs to be carefully tracked across and within asset classes. This, it said, means getting “granular with themes” and constantly adapting to what’s priced in.
“Getting active applies across both public and private markets – and we see greater blending of the two within portfolios,” it said.
BlackRock homes in on private capital
Separately, BlackRock announced on Tuesday it has entered into a definitive agreement to acquire ElmTree with a goal to integrate it into the newly launched Private Financing Solutions (PFS) – created through BlackRock’s combination with HPS Investment Partners.
Commenting on the giant’s acquisition of the net-lease real estate investment firm, Scott Kapnick, CEO of HPS, said structural shifts in the real estate sector are creating new opportunities for private capital.
“The combination of a premier triple-net investor with our leading private financing solutions platform will position us to capture these opportunities for our clients,” Kapnick said.
“ElmTree has the team, expertise and relationships that will help drive growth and deliver differentiated investment solutions, and we are thrilled to welcome Jim and his entire team.”
Last week, BlackRock announced the official completion of its acquisition of HPS and the launch of PFS, which it said combines the firm’s private credit, GP and LP solutions, and private and liquid CLO businesses into one integrated platform.
Chairman and chief executive Larry Fink said the acquisition will allow the firm to deliver better outcomes for its clients by utilising solutions that blend public and private assets.
“The creation of PFS means that we can answer far more client needs with far fewer calls, creating a comprehensive solutions provider for clients and borrowers alike,” Fink said.
