“We believe there is a tactical opportunity in UK equities given that valuations are very attractive, perceived political stability and improving sentiment,” Wei Li, global chief investment strategist at BlackRock, said on Tuesday.
The outlook for interest rates to remain high for a long time has made inflation-linked bonds attractive, BII, a unit of U.S. investment firm BlackRock Inc., said in a mid-year outlook report. At the country level, Mexico and India should “benefit from the restructuring of supply chains in the longer term,” it added.
According to the report, BII is bullish on U.S. stocks and artificial intelligence.
“(Japanese stocks) are our highest conviction equity outlook, supported by a gradual recovery in inflation, shareholder-friendly corporate reforms and the Bank of Japan cautiously normalizing policy rather than tightening,” it said.
Regarding U.S. government debt ahead of the presidential election, Li said BlackRock prefers short- to medium-term government bonds because prices of long-term bonds do not fully reflect the outlook for a widening U.S. fiscal deficit.
Both the leading candidates for the U.S. presidential election, President Joe Biden and former President Donald Trump, have not prioritized cutting government spending, which could lead to a widening of the term premium — the compensation investors demand for holding long-term debt, she said.
“Neither candidate has said much about their plans to reduce the deficit. They have different ways of spending, but they both want to spend,” she said.
“We prefer the front end of the curve, the back end of the curve, over the longer end, especially in the U.S., where the term premium doesn’t reflect the fiscal trajectory,” she added.
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