- Investors may need to rethink the most basic principles of portfolio management as artificial intelligence, geopolitical tensions and other structural shifts reshape markets, according to the BlackRock Investment Institute.
- Traditional portfolio construction methods are becoming less effective in an investment environment increasingly driven by what BlackRock calls mega forces — long-term changes ranging from AI and demographic shifts to geopolitical fragmentation and the energy transition.
- BlackRock strategists led by Jean Boivin suggest that this implies investors should revisit big portfolio calls more often and have an explicit plan B portfolio ready.
- Among its highest-conviction tactical calls, BlackRock remains bullish on assets tied to the AI boom, favoring infrastructure and equipment supporting the AI buildout.
- BlackRock favors infrastructure and equipment supporting the AI buildout, including semiconductors, power systems and data centers, which it argues stand to benefit regardless of the companies that emerge as winners.
- The firm maintains an overweight position on U.S. equities, citing resilient earnings growth and expectations that AI will boost corporate profits.
- In emerging markets, BlackRock prefers countries that manufacture critical AI components and commodity exporters that could benefit from higher energy and raw-material prices.
- BlackRock suggested that investors should look beyond where a company is listed, emphasizing understanding a company's business model and revenue drivers.
- BlackRock is steering investors away from long-duration government debt, underweighting long-term U.S. Treasurys and expecting increases in yields.
- BlackRock favors emerging-market hard-currency debt and U.S. agency mortgage-backed securities, which offer higher income than Treasurys while maintaining similar risk characteristics.
- BlackRock favors infrastructure equity and private credit over the longer term, citing demand generated by AI and geopolitical fragmentation.
- "We still like private credit but see an increase in dispersion of returns," states BlackRock.
BlackRock Investment Institute emphasizes that traditional portfolio management is insufficient amid new 'mega forces' reshaping markets, advocating for more adaptable investment strategies. The firm identifies AI, geopolitical shifts, and demographic changes as core drivers influencing portfolio decisions.12345789101112131415
"We think this means investors should revisit big portfolio calls more often and have an explicit plan B portfolio ready," said Jean Boivin and his team, highlighting the need for continual reassessment in volatile environments.
Among its tactical calls, BlackRock remains optimistic about assets linked to the AI sector, favoring investments in infrastructure and equipment supporting AI, including semiconductors and data centers. The firm positions itself strongly in U.S. equities, citing resilient corporate earnings amid AI growth and undervalued emerging-market opportunities.6
In emerging markets, BlackRock recommends targeting nations producing critical AI components and commodity exporters likely to profit from increased energy demand. The company advises investors to focus more on a company's functional potential than its stock listing location.
On fixed income, BlackRock cautions against long-term U.S. Treasurys, recommending emerging-market hard-currency debt instead. It favors U.S. agency mortgage-backed securities for their favorable income/risk profile and describes a potential for higher returns in private credit amid a changing economic landscape. However, they warn of increased dispersion of returns in that sector.
“BlackRock identifies structural shifts like AI and geopolitical tensions as crucial to investing strategies. They recommend revisiting portfolio calls frequently and preparing explicit backup plans.”
CNBC
