The investment environment is now very unusual, says Jean Boivin, director of the Blackrock Investment Institute.
“There are significant investment opportunities in the situation, but they should not be approached in the same way as decades before 2020,” Boivin says to Kauppalehti.
BlackRock publishes twice a year an overview of the six-month investment outlook. The latest was published now in a situation where a major change has taken place or is taking place in the administrations of several important countries.
The asset manager has already stated for several years that the world’s economy is no longer in a traditional cycle. In 2024, the development of artificial intelligence was a significant market force, inflation fell without weakening economic growth, and there was no recession, even though typical signs predicted it.
Mega drivers.
According to Jean Boivin, director of the BlackRock Investment Institute, investment targets worth looking for include infrastructure
BE: Blackrock
“The opportunities for investors are currently more in the big mega-drivers than in asset classes or regions,” says Boivin.
BlackRock sees five mega-drivers: artificial intelligence, the green transition, the fragmentation of geopolitics, the aging of the population and the change in the financial world, for example with new financial instruments.
In particular, data centers required by artificial intelligence and construction related to the green transition can bring opportunities for investors.
According to Blackrock, an investor should take a risk next year, but be ready to adapt if the market changes.
“Now we shouldn’t take our chips off the table and wait. We believe that the positive market sentiment at the moment is sustainable and will continue at least until the beginning of next year.”
US shares are highly valued, and according to Blackrock, this is not yet the reason for a possible correction, but if the enthusiasm grows too much, the view may change.
“The situation favors risk-taking with regard to the most important themes, but you have to be prepared to react when the situation demands it. Now is not the time to create a portfolio and forget about it,” says Boivin.
The fund manager believes that the better performance of the United States will continue. In addition, BlackRock overweights the Japanese and Chinese stock markets. The Japanese market is supported by the reforms made by companies and the country’s strengthening economy.
Europe is underweight, even though valuations are reasonable and the ECB’s interest rate cuts support companies’ modest profit improvements.
Political uncertainties can keep investors on their toes: BlackRock considers the stock markets of Britain and developing countries to be neutral.
Behind the supremacy of the US market is stable, permanent growth and the ability to make better use of mega-drivers, especially the introduction of artificial intelligence.
According to Boiv, the strengths of the United States are also the improved corporate kappa outlook and the business-friendly tone of the future administration, at least in the short term.
Blackrock believes that US inflation and interest rates will remain at a higher level than before the pandemic. The Fed is believed to continue interest rate cuts in 2025, but there is not much room for a policy rate of less than four percent due to inflationary pressures.
Another thing that, according to Boivin, can affect the market negatively is the new administration’s decisions that may harm the market, for example making international trade more difficult.
According to Boivin, the new administration is trying to keep the economy stable through financial and monetary policy, but at the same time new disturbances may arise. It remains to be seen whether the market will act as a stabilizer.
The AI story may be challenged
According to Boivin, BlackRock believes that the artificial intelligence boom is on a sustainable basis, but that belief may be challenged from time to time next year, which would affect the development of stock markets.
“We may see moments next year when the artificial intelligence story is called into question. We saw something similar last August,” says Boivin.
In the United States, inflationary pressures are brought by investments in artificial intelligence and the green transition. An aging population and a slowdown in immigration are pushing up wages, which also makes it harder for inflation to fall to the Fed’s two percent target. In 2024, economic growth continued as inflation fell after the effects of the pandemic disappeared and partly due to unexpected immigration.
BlackRock does not favor long US government bonds, as it is expected that the US budget deficit will grow even further. On the other hand, a good return is expected from corporate loans in relation to the risk.
The correlation of equity and fixed income investments has changed. Government bonds no longer provide protection when stocks fall. Because of this, BlackRock sees gold and bitcoin as an option for investors looking for diversification. Bitcoin’s potential lies in its demand, which may rise if investors believe that Bitcoin will be more widely adopted as a means of payment.
“Bitcoin can have a small tactical place in an investment portfolio if you believe bitcoin adoption will increase,” says Boivin.