The world’s largest asset management company says a pull back in U.S. equites has put a dent in U.S. outperformance compared to other nations.
In a report Monday, BlackRock Inc. said it sees global markets benefiting from “structural shifts.” This comes after U.S. stock markets finished slightly higher Friday, breaking a four-week losing streak. In December of last year, BlackRock said it viewed U.S. stocks as “standing out” compared to other markets due to higher growth and an ability to capitalize on “mega forces” driving corporate earnings.
“In the near term, policy uncertainty has shaken investor conviction in U.S. growth and equity strength. That’s pulled the S&P 500 down more than three per cent,” the report said.
“The selloff has been exacerbated by investors rapidly pulling out of popular trades – like the tech-heavy momentum equity style factor and cyclical trades that were betting on a boost from growth from potential U.S. deregulation and tax cuts.”
At the same time, the report highlights global stocks stand to benefit from “country-specific developments.” Some of the bright spots in global equity markets outlined in the report include defence and infrastructure spending plans in Germany, a brighter outlook for Japan’s economy and Mexico’s role in shifting supply chains.
Overall, BlackRock said it thinks U.S. stocks will be able to maintain their lead amid a broadening out of the artificial intelligence investment theme, but uncertainty presents risks to U.S. and global stock markets.
“Country-level shifts and events are creating bright spots in global stocks, so we get selective. We stay overweight U.S. stocks on a six- to 12-month tactical horizon. Yet prolonged uncertainty could hurt both U.S. and global risk assets,” the report said.
