Breaking News
Investing Pro 0
New Year’s SALE: Up to 40% OFF InvestingPro+ CLAIM OFFER

BlackRock backs banks, cuts European, EM debt as part of 'new playbook'

Economy Nov 30, 2022 11:54AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: The BlackRock logo is pictured outside their headquarters in the Manhattan borough of New York City, New York, U.S., May 25, 2021. REUTERS/Carlo Allegri/File Photo
 
BLK
+0.04%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Davide Barbuscia and Marc Jones

NEW YORK (Reuters) -Asset manager BlackRock (NYSE:BLK) has said 2023 will require a new investment playbook, backing banks and energy sectors to do well, while slapping 'underweights' on longer-term European government bonds and emerging market local currency debt.

The BlackRock Investment Institute (BII) said in its 2023 global outlook that while the case for investment credit had brightened and short-term government debt yields looked attractive, the pressures of higher interest rates would weigh on longer-term sovereign bonds.

"The macro damage we expect for next year is yet to be fully reflected in market pricing," said Wei Li, global chief investment strategist at the BII.

BlackRock expects global central banks to over-tighten financial conditions in their fight against stubbornly high inflation to the point of causing a recession next year.

It said it therefore maintained a tactical underweight on developed market equities, while recommending investors to gravitate towards high-quality corporate debt and short-dated U.S. Treasury bonds, given the returns they offer after this year's rapid increase in interest rates.

"We are going to see inflation falling ... but at the same time we don't think we're going to be settling back to the 2% world we've been accustomed to, at least not anytime soon," BII head Jean Boivin said at a media briefing in New York.

"We don't think the inflation outcome we'll end up living with, which is going to be more like 3% than 2%, is reflected in markets at this juncture," he said.

Sustained higher inflation could mean central banks will unlikely cut interest rates rapidly to support contracting economies, BlackRock said, so the old playbook of adding exposure to long-term and safe government bonds in a recessionary environment may not work next year.

"Policy rates may stay higher for longer than the market is expecting ... As a result, we remain underweight long term government bonds in tactical and strategic portfolios," BII said in its outlook report.

As part of that stance, it has moved underweight on longer term European government debt as well as UK Gilts. Gilts have seen a strong rebound in recent weeks after been thrown into turmoil by the unfunded tax plans of former UK leader Liz Truss and her finance minister Kwasi Kwarteng.

 

BlackRock backs banks, cuts European, EM debt as part of 'new playbook'
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email