2022 has been marked by significant declines in the value of U.S. stocks, the likes of which have not been seen since the 1960s.
According to Alex Brazier, the company’s deputy head, who spoke with Bloomberg Markets on June 17, BlackRock remains neutral on stocks over the next six to twelve months, as the S&P 500 and Nasdaq continue to rack up losses and the Treasury yields are rising.
“We are not buying this dip because it’s not a dip; it’s actually driven by a shift in the fundamentals of the equity market. We’ve got a higher rate path we’ve got now a rising probability of recession in the U.S., a very high likelihood of a recession in Europe at the same time, and as a result, equities don’t look cheap to us.”
Micro bullish but macro bearish
Furthermore, margins in the U.S. are at an all-time high, which puts pressure on wages and buying power of the consumers, so expectations of increasing wages are driving analysts to believe that profit margins for companies will be eroded with such an increase. Speaking on this issue, Brazier sees an out for the U.S.:
“Things that that’s going to help the U.S. to sort out its macro position is actually something that’s kind of macro bullish but micro bearish.”
Speaking on investment opportunities under these market conditions, the BlackRock deputy said that now is not necessarily a time to be in cash but rather eye the energy markets and commodities, which may be in short supply.
“This isn’t the market where you come out necessarily into cash, but it’s a market where we’re more cautious. We’re looking for signs particularly from the Federal Reserve over time that it is acknowledging the impact it’s having on growth.”
He also added:
“We’re going to see a scramble for alternative sources of supply in the west. We’re seeing the U.S. begin to increase production, but still, it’s these very high prices that are needed to bring that on for that reason energy commodities all going to be in short supply and therefore offer investment opportunities.”
It seems, despite all of the trouble in the markets, that there are pockets where investment gains can be had. Investors should follow the advice and be weary and invest in companies that can survive a recession.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.