Investing.com -- Trade tensions are reshaping the global economic landscape, and BlackRock (NYSE:BLK) says investors must be increasingly selective in their strategies, even as long-term themes such as artificial intelligence and fiscal expansion continue to offer pockets of opportunity.
“We see a supply-driven U.S. contraction this year from the trade conflict,” BlackRock analysts wrote.
While they expect lower GDP to translate into weaker earnings, they remain overweight U.S. equities. “Mega forces are unlocking select opportunities across sectors and regions. That keeps us positive on developed market (DM) stocks.”
According to BlackRock, recent tariff actions could push inflation higher and constrain the Federal Reserve’s ability to cut rates.
They note that U.S. corporate earnings expectations are already adjusting, with S&P 500 growth forecasts dropping from 14% in January to 8.5%, based on LSEG data.
Earnings season is said to offer a window into how companies are navigating the disruption.
“Moving production to the U.S. or countries on better terms with the U.S. has, for the first time, been discussed on all Q1 earnings calls so far,” BlackRock noted, citing Alphasense data.
Still, “external estimates see tariffs denting net earnings by 10-20%,” said the firm.
Even amid this uncertainty, BlackRock highlights areas of resilience. Big tech companies saw first-quarter earnings surge 30% versus 8% for the rest of the market.
In Europe, they’ve upgraded equities to neutral, supported by infrastructure and defense spending, though political fragmentation may complicate execution.
Gold is emerging as a preferred hedge: “Gold has been a better buffer against geopolitical risks than other traditional safe-haven assets,” they wrote, pointing to its strength since April’s tariff announcement.
“Bottom line: Even as we expect a supply-driven contraction in the U.S., we see mega forces like AI, greater fiscal spending and higher interest rates creating select opportunities,” BlackRock concluded.