“The Great Moderation, a period of steady growth and inflation, is over,” said Philipp Hildebrand, Vice Chairman of BlackRock, and his team in the mid-year outlook of the world’s largest asset manager.
“Instead, we are braving a new world of heightened macroeconomic volatility – and higher risk premia for both bonds and equities.”
BlackRock said it was now underweight US, European and UK stocks while maintaining a neutral stance in Japanese, Chinese and emerging market stocks.
“Attractive valuations” had prompted the asset manager to revise its view on investment grade credit upwards. BlackRock has also changed its view on UK gilts to overweight them, making them its favorite nominal government bonds.
“We think the market’s assessment of the Bank of England’s rate hikes is unrealistically hawkish in light of deteriorating growth.”