BlackRock (BLK) has lowered its stock outlook amid rising economic uncertainty and persistent inflation.
BlackRock Investment Institute strategists said Monday that the company reduced its exposure to shares of developed markets, citing aggressive intervention by central banks to control rising prices in the global economy.
“Right now, we believe the Fed has fit in in response to political pressures to curb inflation,” strategists led by Jean Boivin said in a note released Monday. “Eventually, the damage to growth and jobs in the fight against inflation will become apparent, in our view, and central banks will live with higher inflation.”
BlackRock’s managed assets topped $ 10 trillion at the end of last year, making it the world’s largest asset management company.
In a similar comment last month, BlackRock strategists argued that the US central bank’s rate hike campaign was poised to curb economic growth without necessarily resolving inflationary pressures. The company argued that the underlying high inflation had been caused by “unusually low production capacity in an incomplete restart after the pandemic” rather than overheating demand.
As a result of its downward view of stocks, BlackRock also said that traditional 60/40 and “buy down” bonds (or buy stocks reflexively after a short-term fall) are no longer effective investment strategies. The firm indicated that it has increased its allocation to the investment grade credit along with the reduction in its equity stake.
“We see a new era of volatile inflation and growth leaving aside a period of moderation,” the company said in a comment Monday. “We are lowering stocks and improving credit in this new regime.”
The revised downward outlook comes just over a week after stocks ended their strongest first-half drop in more than five decades.
The first six months of the year saw the S&P 500 enter a bearish market, and this fall has caused other major Wall Street institutions to lower their target price for the benchmark.
The story goes on
A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, USA, June 22, 2022. REUTERS / Brendan McDermid
Among the companies that cut their outlook for equities was Credit Suisse, chief U.S. equity strategist Jonathan Golub lowered his year-end estimate for the S&P 500 by 600 points to 4,300 in a note to customers on July 5th. Although the new goal implies a rebound. the rest of 2022, the figure marks an abrupt change from a December 2021 research report in which the bank raised its target for the U.S. benchmark to 5,200 from 5,000, citing economic growth “solid”. The S&P 500 limited Friday’s trading session to 3,899.
Even the most optimistic street strategist seems less optimistic.
Oppenheimer Asset Management chief investment strategist John Stoltzfus lowered its year-end S&P 500 target price to 4,800 from 5,330 on Thursday. Prior to the change, Stoltzfus had the highest year-end price target for Wall Street strategists tracked by Yahoo Finance, even reiterating the call on June 21st.
Meanwhile, Citigroup (C) strategist Scott Chronert, in a note to clients on Monday, said he sees the S&P 500 rising 8% from current levels to end the year at 4,200.
“We cut most stocks in developed markets to a tactical underweight,” said BlackRock, who attributed the downgrade to higher macro volatility, as “central banks appear willing to curb inflation by crushing growth.” dir BlackRock.
However, the institution reiterated that it prefers equities to long-term bonds as yields rise and inflation trends are higher.
“We believe that central banks will live with higher inflation, stop and then change course with increasing their rates, a big help for stocks,” strategists said.
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Alexandra Semenova is a Yahoo Finance journalist. Follow her on Twitter @alexandraandnyc
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