When BlackRock (BLK) becomes more bearish on stocks, it’s a wake-up call to sound in the investing arena.
The world’s largest asset manager on Tuesday raised its view on U.S. Treasuries, favoring short-term bonds as higher yields improve upside. The research was conducted by Jean Boivin, Rick Rieder and Wei Li of BlackRock.
In turn, the team lowered its view on U.S. stocks to neutral.
“Higher yields and potentially excessive expectations for Fed tightening create room to reduce our underweight to the U.S. Treasury – a mainstay for most of the past six years,” the BlackRock team said. “We are re-rating Treasury bills, favoring short-term bonds. In return, we are taking profits by downgrading US equities to neutral to manage potential volatility around AI development.”
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They remain bullish on AI stocks, however, despite the new concerns.
“We remain convinced of the fundamentals of AI and our preference for AI within US equities,” the strategists added.
BlackRock’s stock downgrade comes at a precarious time for non-AI areas of the market. The selloff has accelerated amid rising U.S. Treasury yields, which has raised the cost of capital for companies that may not be growing as fast as AI companies.
About 84% of S&P 500 stocks (^GSPC) are now trading at least 10% below their all-time highs, according to new analysis from the Kobeissi Letter.
Additionally, 59% of S&P 500 stocks are down at least 20% from their highs, 41% are down more than 30%, and 17% are down more than 50%.
“I would say it’s not a crisis but an eye-opener, and it’s something I think needs to be thought about,” Rieder said of Sozzi Unleashed’s performance development in late September.
Brian Sozzi is the editor-in-chief of Yahoo Finance, host of the Sozzi unleashed the morning show and Power Actors with Brian Sozzi podcast and member of the Yahoo Finance editorial leadership team. Follow Sozzi on @BrianSozzi, InstagramAnd LinkedIn. Any advice on stories? Email brian.sozzi@yahoofinance.com.
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