BlackRock cuts US stocks to neutral to manage potential volatility around the AI buildout, while staying positive on AI and upgrading short term Treasuries
JUST IN: 馃嚭馃嚫 BlackRock cuts its outlook on US stocks, citing concerns over AI market volatility.
Context
When the world's largest asset manager trims its US stock view and names the AI buildout as a source of volatility, it signals growing caution about how much AI spending markets can absorb.
WatcherGuru is relaying a weekly note from the BlackRock Investment Institute dated October 12, which Reuters reported on October 13. BlackRock calls the move a short term risk management step, not a change in its core views on AI.
Deep dive
On October 13, WatcherGuru posted that BlackRock cuts its outlook on US stocks, citing concerns over AI market volatility.
In its weekly commentary, the BlackRock Investment Institute says it is downgrading US equities from overweight to neutral to manage potential volatility around the AI buildout, partly to fund an upgrade of US Treasuries, where it favors short term bonds. It says it retains its conviction in AI fundamentals and still prefers AI and tech within US stocks, and that it is monitoring growing focus on AI policy and the AI buildout in jurisdictions across the country.
Reuters reported that the note was written by Jean Boivin, head of the institute, Rick Rieder, BlackRock's chief investment officer of fixed income, and Wei Li, its global chief strategist. It said BlackRock is ending a Treasury underweight held for most of the past six years, arguing that expectations of rate hikes are overdone.
InvestingLive reported that the note says 10 year yields have climbed to around 5.25% this year and that markets have priced in 160 basis points of Fed tightening, which BlackRock views as too much. Trustnet quoted Li saying the firm is managing near term risk, not changing its core convictions, and stands ready to add risk again as visibility improves.
What to expect next
Watch whether other large asset managers follow BlackRock in trimming US stock exposure, and whether AI heavy stocks underperform the broader market in the coming weeks.
Also watch Treasury yields near their 24 year highs, the Fed's next rate decision, and third quarter earnings from the big AI spenders, which BlackRock is likely to weigh before adding risk back. A reversal of the call would be a signal in its own right.