BlackRock Bets on AI-Driven Stock Rally, Adjusts Investment Strategy for 2025

BlackRock Investment Institute goes further 'overweight' on U.S. equities

Dec 4 (Reuters) - The BlackRock Investment Institute (BII) said on Wednesday that it had gone further "overweight" on U.S. equities as greater adoption of AI unlocks buying opportunities across sectors, even with U.S. stocks trading at record highs. The BII, a research and analysis arm of the world's largest asset manager, said in its outlook note for 2025 that it sees persistent U.S. inflationary pressures from rising geopolitical fragmentation, big spending on AI and low-carbon transition. BII maintained its "overweight" rating on Japanese stocks, pointing to tailwind from corporate reforms, the return of mild inflation as well as corporate pricing power. In emerging markets, it liked India and Saudi Arabia. In debt market, BII raised its weighting on short-term U.S. Treasuries to "neutral" from "underweight", saying market pricing now roughly match its expectations for interest rate cuts from the Federal Reserve next year. "We think it will cut further in 2025, and growth will cool a little, but with inflation still above target the Fed won't have room to cut much past 4%, leaving rates well above pre-pandemic levels," BII said in its outlook. Reporting by Sruthi Shankar and Siddarth S in Bengaluru; Editing by Alan Barona Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Artificial IntelligenceArtificial Intelligence

BlackRock bets on AI-driven stocks rally but US debt clouds 2025 outlook

NEW YORK (Reuters) - BlackRock expects the artificial intelligence boom to continue to boost U.S. stocks next year and support economic growth more broadly, although rising U.S. government debt levels could threaten its upbeat 2025 forecasts. Innovations in AI technology will likely benefit U.S. stocks more than their European peers, while private markets will increasingly play a key role in financing AI-related infrastructure, the BlackRock Investment Institute, a research arm of the world's largest asset manager, said on Wednesday. "We stay risk-on ... and go further overweight U.S. stocks as the AI theme broadens out," it said in a 2025 outlook report based on views of senior portfolio managers and investment executives at BlackRock, which manages $11.5 trillion in assets. While U.S. economic growth may cool a little next year, the Federal Reserve will likely not be able to meaningfully lower interest rates as inflation remains sticky and above the central bank's target, the institute said. It does not expect interest rates to go below 4% from their current 4.5%-4.75% range. Continued price pressures due to factors such as geopolitical fragmentation and infrastructure expenditure could weigh on the bond market. Investors will likely demand higher compensation to hold long-term government debt to account for inflation and wide U.S. deficits, it said. This will put upward pressure on long-term Treasury yields, which move inversely to prices. "We are underweight long-term U.S. Treasuries on both a tactical and strategic horizon - and we see risks to our upbeat view from any spike in long-term bond yields," it said. BlackRock prefers U.S. corporate debt over Treasuries, as well as government bonds in other developed markets such as the United Kingdom, where the Bank of England will cut interest rates more than what the market is pricing, the institute said. In stocks, it favors sectors such as tech and healthcare, while it sees assets like gold and bitcoin as alternatives to government bonds to offset stock market declines. BlackRock this week announced plans to buy credit investment manager HPS Investment Partners for about $12 billion, in a deal that will further its offerings in private credit, a key area of growth for the New York-based asset manager. "Private markets can offer exposure to early-stage growth companies driving AI adoption and to vital infrastructure projects," the BlackRock Investment Institute said. "In private markets, we stick to our long-term preference for infrastructure equity due to attractive relative valuations and mega forces," it said. "For income, we prefer direct lending given more attractive yields in private credit."

AI to continue boosting US stocks next year, BlackRock says By Investing.com

Investing.com -- BlackRock (NYSE:BLK) predicts that the ongoing surge in AI will continue driving US stock performance and contribute to broader economic growth in the coming year, though rising levels of US government debt could pose risks to its optimistic 2025 projections. According to the BlackRock Investment Institute, the research division of the $11.5 trillion asset management giant, advancements in AI are likely to provide greater benefits to US equities compared to European markets. The firm also expects private markets to play an expanding role in funding AI-related infrastructure. "We stay risk-on ... and go further overweight US stocks as the AI theme broadens out," the institute wrote in its 2025 outlook, which reflects insights from senior portfolio managers and investment leaders at BlackRock. Although US economic growth may slow slightly in 2025, BlackRock believes the Federal Reserve is unlikely to significantly cut interest rates due to persistently high inflation. It does not expect rates to fall below 4%, remaining near the current range of 4.5% to 4.75%. Price pressures stemming from geopolitical tensions and infrastructure spending could also negatively impact the bond market. The institute anticipates that investors will demand higher returns to hold long-term government bonds, given inflation and large US budget deficits. This could push long-term Treasury yields higher, as yields move inversely to bond prices. "We are underweight long-term US Treasuries on both a tactical and strategic horizon - and we see risks to our upbeat view from any spike in long-term bond yields," the report said. In the equities space, BlackRock favors sectors like technology and healthcare. It also highlights gold and bitcoin as alternatives to government bonds, offering potential protection against stock market volatility.