A BlackRock Inc sign hangs above a building in New York.
Lucas Jackson | Reuters
In light of the pace of deployment of the Covid-19 vaccine and the large amount of fiscal stimulus in the United States Black lock The Investment Institute chose the risk-on approach in 2021.
US investors announced on Monday that they were upgrading their stocks while downgrading government bonds to underweight and credits to neutral. Being “underweight” means holding less assets than the benchmark index and the belief that the assets will underperform.
Rising inflation expectations drive benchmarks US Treasury Higher yields in recent weeks have prompted a pullback in the revived stock market, as investors wondered if unprecedented levels of stimulus from central banks could be released sooner than expected.
But CNBC’s “Squaw box europe“On Tuesday, BlackRock bond strategist Scott Thiel emphasized that Treasury yield recovery is not particularly important in the historical context, and real yields (inflation-adjusted) remain steadily negative. did.
“We think the economic impact of the Covid crisis will be about one-quarter the economic impact of the global financial crisis, but the stimulus is like a quadruple,” said Thiel.
“Therefore, many important aspects are overlooked when trying to apply some kind of periodic rulebook or game plan to this crisis, one of which is the idea that the economy will exit very aggressively. . “
In a note on Monday, BlackRock strategists said the Treasury yield for the decade since 1998 was 0.9% as the US break-even inflation rate (an indicator of market inflation expectations) rose 1%. I emphasized that it has risen.
“But since March last year, inflation at the break-even point has risen 1.2% and nominal yields have risen only 0.5%. As a result, inflation-adjusted yields, or real yields, have fallen into the negative territory. It shows the difference between Covid shocks. From the perspective of the pace of recovery of economic activity.
High quality growth and circulating stocks
Technology stocks Among the main victims of jerky spells In the stock market caused by rising bond yields, as investors avoided so-called growth stocks and preferred more economically sensitive periodic names prior to the expected economic recovery.
Growth stocks are stocks of companies that manage significant, sustainable and positive cash flows, have high future returns, and are expected to grow faster than their peers.
“Many of the Covid-related trends stay here and can fluctuate over time, but there is clearly a major shift to online and we expect it to continue,” said Thiel.
“But investors think they need to be exposed to cyclical, re-emergence of world trade, which is why they like emerging market equities and have shifted the underweight of European equities to neutral. . “
Investors have suggested that investors need to be exposed to both sides of the US-China “bipolar world” in the equity market, but expect the underlying interest rate environment to be “mission-critical.”
“This is our new name, the idea that interest rates, especially real interest rates, will rise, but historically not so much, they are less volatile, and that’s what we’ve seen so far.” He added.
BlackRock has taken a neutral position on corporate credit and said in a note on Monday that it favors equities for a more attractive valuation.
“Tactically, we think the corporate bond market is more difficult than the equity market in terms of total returns, as spreads have returned to pre-Covid levels and interest rates themselves are very low,” said Thiel. Says. Said.
“On a strategic basis, valuations look so full that we prefer stocks.”
BlackRock Bond Experts Explain Where You Can’t Put Money Right Now
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