BlackRock, the world’s largest asset manager, has upgraded its overall outlook for U.S. stocks from neutral to overweight. In their weekly commentary research note, the team of strategists at the BlackRock Investment Institute explained the reasoning behind this upgrade.
Positive Momentum and Potential Rate Cuts
The strategists expect the upward momentum of the S&P 500 to continue over the next six to 12 months. They believe that cooling inflation and potential interest-rate cuts by the Federal Reserve will support this trend. As a result, they see the stock market’s tech-driven rally, which has been fueled by investor excitement over artificial intelligence, expanding beyond the tech sector.
A Soft Economic Landing
The team at BlackRock sees markets pricing in a scenario of a soft economic landing. They anticipate that inflation will fall to 2% without a recession. With markets typically focusing on one theme at a time, this narrative could support the rally over the tactical horizon.
Strong Start to the Year
U.S. stocks have entered the new year with a strong tailwind following an impressive 2023 performance. Encouraging economic data, including robust GDP growth in the fourth quarter and declining inflation metrics, may give the Federal Reserve the green light to begin cutting interest rates as early as the first half of 2024.
In summary, BlackRock is optimistic about the outlook for U.S. stocks, citing favorable economic indicators and the potential for rate cuts. They believe that the stock market rally will broaden beyond the tech sector, fueled by a positive macro outlook.