BlackRock waits for him rise of artificial intelligence continue to boost US stocks next year and support overall economic growth, although rising US public debt levels could threaten its optimistic 2025 forecasts.
Innovations in AI will likely benefit US stocks more than their European peers, while private markets will increasingly play a key role in financing AI-related infrastructure, the BlackRock Investment Institutea research arm of the world’s largest asset manager.
“We maintain risk (…) and are further overweight US equities as the AI theme expands,” he says in a 2025 outlook report based on the views of portfolio managers and investment executives at BlackRock, which manages $11.5 trillion in assets.
Although U.S. economic growth may cool somewhat next year, the Federal Reserve likely won’t be able to significantly lower interest rates as inflation remains stable and above the central bank’s target, according to the institute. . He does not expect interest rates to fall below 4%, from the current 4.5%-4.75%.
Continued price pressures due to factors like geopolitical fragmentation and infrastructure spending could weigh on the bond market.
Investors are likely to demand higher compensation for holding long-term government debt to account for inflation and large U.S. deficits. This will put upward pressure on long-term Treasury yields, which move inversely to prices.
“We are underweight long-term U.S. Treasuries, both on a tactical and strategic horizon, and see risks to our bullish view in any rally in long-term bond yields,” he said.
BlackRock prefers US corporate debt to Treasury bonds, as well as government debt from other developed markets such as the United Kingdom, where the Bank of England will cut interest rates more than the market anticipates, according to the institute.
Regarding equities, it favors sectors such as technology and healthcare, while it sees assets such as gold and bitcoin as alternatives to public debt to offset stock market declines.
BlackRock this week announced plans to buy credit investment manager HPS Investment Partners for about $12 billion, in a deal that will expand its private credit offering, a key area of growth for the New York-based asset manager. .
“Private markets can provide exposure to early-stage growth companies driving AI adoption and vital infrastructure projects,” notes the BlackRock Investment Institute.
“In private markets, we maintain our long-term preference for infrastructure equities due to attractive relative valuations and mega strengths,” he said. “For income, we prefer direct loans given the more attractive yields on private credit.”
