Market Updates

BlackRock is optimistic about the potential continuation of Japan’s equity rally, distinguishing it from previous false starts. They anticipate that both macroeconomic trends and company-specific advancements will propel the next phase of growth. The anticipated corporate earnings growth, foreseen since 2023, is now materializing as expected.

U.S. stocks rebounded despite the impact of strong inflation data, suggesting resilience in investor risk tolerance. While maintaining an overweight position in U.S. stocks, BlackRock remain strategically active, prepared to adjust their stance in anticipation of potential inflation concerns.

BlackRock observes increased backing for emerging markets (EMs) amid the market’s positive outlook on risk assets, supported by sustained U.S. growth, moderating inflation, and the Federal Reserve’s readiness to lower policy rates. EMs have demonstrated resilience in the face of recent Fed rate hikes.

The U.S. Q4 corporate earnings season is currently underway. BlackRock believes that this won’t dampen the positive risk appetite at the moment. They maintain an overall overweight position in U.S. stocks, anticipating that the optimistic market sentiment will continue for now.

The surge in U.S. tech stocks fuelled by enthusiasm for artificial intelligence (AI) uplifted the market throughout 2023. According to BlackRock, the current rally shows potential for continuation, although they remain flexible in anticipation of a resurgence in inflation later this year.

The unfolding events in Asia and the Middle East underscore the significance of geopolitical fragmentation, one of the five mega forces or structural shifts monitored by BlackRock. This fragmentation stands out as a crucial factor contributing to persistent inflation pressures, prompting the maintenance of policy rates above pre-COVID levels.

BlackRock concurs that inflation is expected to approach 2% this year, thereby bolstering that narrative at present. They will closely observe the earnings season for any indications of vulnerabilities, particularly in the context of elevated valuations.

The momentum from the end-2023 rally might extend deep into 2024 with further easing of inflation. However, the uneasy beginning of the year for stocks and bonds indicates investor apprehension regarding the macroeconomic outlook. BlackRock remain adaptable and believe that managing macro risks should be a deliberate focus.

BlackRock shares three insights from the experiences of 2023 to guide their investment strategy in the coming year: Firstly, the market’s fluctuation between macro narratives. Secondly, increased dispersion is generating opportunities. Thirdly, the impact of artificial intelligence buzz.

Global equities marched higher again last week. The key driver behind the equity market moves was the Fed’s signalling of rate cuts in 2024, with the message that inflation had surprised to the downside taken as dovish.