BlackRock, the world’s largest asset manager, is advising investors to reduce their exposure to US stocks. The $US14 trillion investment firm suggests investors are underestimating the economic consequences of surging energy prices and the ongoing conflict in the Middle East. BlackRock manages investments across asset classes on behalf of institutional and retail clients worldwide, offering a range of solutions from rigorous fixed income strategies to dynamic equity portfolios. They also provide technology services.
According to Alex Brazier, global head of investment at BlackRock, the full extent of the damage to the global economy is not yet reflected in share prices. Brazier cautioned that the impact extends beyond crude oil, affecting natural gas, fertilisers, and industrial gases, all of which will have a significant impact on global growth this year. Oil prices have risen nearly 50 per cent since the start of the conflict, prompting BlackRock to adopt a more defensive stance on American companies, shifting from an overweight to a neutral position on the US sharemarket.
Instead of focusing on companies exposed to artificial intelligence disruption, BlackRock is favouring physical infrastructure and equipment supporting AI development, such as semiconductors, power, and data centre companies. The company has shifted its strategy to prioritize stability over aggressive growth, overhauling its approach to selecting US companies that can withstand market volatility. They are now using more precise investment tools to move away from the tech companies that dominated 2023, preferring smaller companies and value stocks.
BlackRock has also increased hedging in its US equities portfolio to protect clients from currency fluctuations, as the US dollar has declined 5 per cent against a basket of major currencies in the past year. While maintaining a significant stake in Australian companies, BlackRock is currently leaning more towards international stocks, particularly in Japan, where mild inflation and corporate reforms have improved the country’s sharemarket outlook. The fund manager has also boosted cash reserves and is maintaining its position in gold as a safety net.
