BlackRock Investment Institute shifted from overweight to neutral on US equities amid heightened market volatility.
BlackRock analysts note in a new market commentary that the shift is rooted in anticipated macroeconomic policy.
“Higher interest rate expectations could weigh on the market – and small caps in particular. We keep our overweight to companies that benefit from the AI mega force.”
The financial giant also shifted from overweight to neutral on Japanese equities.
“Japan’s exposure to imported energy may erode strong equity gains powered by healthy corporate balance sheets and governance reforms.”
Over a 6-12 month timeline, the BlackRock analysts note they favor investing in AI infrastructure and equipment providers, arguing they will “stand to benefit no matter the winners or losers.”
“We particularly favor what we call ‘electro tech’ – batteries, power electronics and electric motors at the core of AI, energy, infrastructure and defense. AI is not just powering demand; it is tightening links across energy, technology, utilities and infrastructure, pushing up electricity use and the need for power capacity. This is colliding with limited supply of key materials such as copper – especially in fast-growing battery storage. Countries are diversifying supply and expanding grids – supporting utilities, though with returns capped by regulation. They are also reducing reliance on a narrow set of LNG suppliers, keeping prices elevated for now as buyers pay for supply security.”
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