The global outlook from Blackrock
Blackrock manages a barely-fathomable $4.5 trillion in assets. The chief investment strategists at the firm released their latest global outlook today and outlined their key themes for the year ahead.
1) Central bankers are in charge
"Until global economic growth picks up in earnest, we think investors will again and again turn to central banks for direction and support," Blackrock writes.
They expect the over-reliance on central bankers to create problems down the road and a market overreaction when the Fed does start to hike.
2) Underweight US equities
They are worried about US economic softness. They especially note the lowly Chicago Fed National Activity Index and call it "one of the most telling economic indicators." They note that it has been negative for 7 out of 9 months this year.
They warn that manufacturers will get hit by the strong US dollar and weak overseas demand.
3) They see a weak euro
In outlining their overweight Europe strategy, they highlight that hedges should be put on to account for the soft euro.
The ECB is on the verge of extending its current quantitative easing (QE) program past the original end date of September 2016. This could pressure the euro to weaken further ---a tailwind for eurozone stocks. The only caveat, given the expectations for more QE and a soft euro, investors should consider strategies that employ a hedge against some or all of the euro exposures."
4) Overweight Japanese stocks
They note that Japanese stocks have outperformed U.S. stocks by a wide margin year-to-date, relative valuations are still highly favorable. They expect near-term share buybacks and the potential for more action from the BOJ.
5) Sector outlook
Underweight global consumer staples, overweight global financials, neutral in energy, neutral in emerging markets and they favor high yield bonds.
