BlackRock’s Investment Institute (BII) highlighted a shift in strategy as a response to increasing uncertainty in traditional long-term economic trends. On Tuesday, the Institute indicated that this uncertainty is leading them to adopt shorter-term strategies with a focus on six- to twelve-month horizons in their investment outlook. For many years, markets relied on stable fundamentals such as inflation stability, fiscal discipline from governments, and central bank independence. However, recent events—including U.S. tariffs and concerns regarding the Federal Reserve’s political independence—have undermined investor confidence in these principles.
In its mid-year 2025 global investment outlook, BII noted that the loss of these macroeconomic anchors makes it difficult to predict the long-term direction of the global economy. Consequently, BII has adjusted its investment approach, emphasizing a more immediate focus rather than long-term forecasts. In terms of specific investment preferences, BII has become more optimistic about government bonds in the euro area for the next six to twelve months. When it comes to equities, the Institute continues to favor U.S. stocks over European ones, driven by growth in sectors such as aerospace and defense amid increased government spending in Europe.
Nonetheless, U.S. stocks are expected to lead the market, propelled by advancements in artificial intelligence and ongoing demand for technology, despite the negative impact of tariffs on the economy. Furthermore, the Institute predicts that tariffs and declining U.S. immigration rates will continue to exert upward pressure on inflation, which could hinder the Federal Reserve’s capacity to lower interest rates. BII maintained a bearish outlook on long-dated U.S. Treasuries but shifted its view on emerging market local currency debt from “underweight” to “neutral,” citing improved growth prospects in emerging markets and the potential for a weaker U.S. dollar as factors that enhance the attractiveness of these investments.