BlackRock Upgrades Outlook for U.S. Stocks on Easing Inflation
BlackRock, the world’s largest asset manager, has revised its outlook for U.S. stocks, upgrading them to overweight in light of easing inflation. With more than $9 trillion in assets under management, BlackRock believes that the initial stock rally driven by excitement over artificial intelligence (AI) has the potential to broaden out. The firm also cited solid economic growth and cooling price pressures as factors supporting the market’s positive macro outlook.
According to Jean Boivin, head of the BlackRock Investment Institute, inflation is expected to reach the Federal Reserve’s 2% target this year, leading to a possible interest rate cut. As a result, the firm is upgrading broad U.S. stocks, incorporating its index level view and AI theme preference, on a tactical horizon of six to 12 months.
Tech Stocks Drive S&P 500 to Record Highs Amidst Positive Economic Data
The S&P 500 reached record highs last week, propelled by strong performances from tech stocks and optimistic economic data. Investors were encouraged by the solid economic growth evident in a 3.3% increase in gross domestic product (GDP) during the fourth quarter of 2023, surpassing the Wall Street consensus estimate of 2%. BlackRock has noted that corporate earnings and profit margins have remained resilient despite higher interest rates and costs.
Market participants are closely monitoring earnings reports from the “Magnificent Seven” tech giants, including Alphabet, Apple, Amazon, Meta Platforms, and Microsoft. These reports will shed light on the strength of the technology sector and their impact on the broader market.
BlackRock Anticipates Inflation Rollercoaster Ahead, Expects Temporary Dip to 2%
While BlackRock acknowledges the likelihood of inflation falling near the Federal Reserve’s 2% target this year, it anticipates a temporary rise toward 3% in the following year. The asset manager warns of an impending “inflation rollercoaster” and advises flexibility in response to these changes.
BlackRock argues that wage growth in the U.S. remains elevated, making it challenging for services inflation to slow down enough to maintain core inflation near 2%. Consequently, the firm suggests that although inflation may provide a short-term boost to market sentiment, it is unlikely to remain at the targeted level in the long run.
Analyst comment
Positive news: BlackRock Upgrades Outlook for U.S. Stocks on Easing Inflation. Market will likely experience a rally in broad U.S. stocks driven by excitement over artificial intelligence, solid economic growth, and cooling price pressures.
Positive news: Tech Stocks Drive S&P 500 to Record Highs Amidst Positive Economic Data. The S&P 500 reached record highs due to strong performances from tech stocks and solid economic growth.
Neutral news: BlackRock Anticipates Inflation Rollercoaster Ahead, Expects Temporary Dip to 2%. While inflation is expected to fall near the Fed’s target this year, BlackRock warns of a temporary rise to 3% the following year and advises flexibility in response.
