Blackrock, Inc. · NYSE:BLK
Blackrock — BlackRock Investment Institute — Q4 2019 Earnings Presentation
20 slides from Blackrock's earnings presentation, November 2019
Slide 1: Global Outlook - Update
November 2019 Global Outlook - Update FOR PUBLIC DISTRIBUTION IN THE U.S., HONG KONG, SINGAPORE AND AUSTRALIA. FOR INSTITUTIONAL, PROFESSIONAL, QUALIFIED INVESTORS AND QUALIFIED CLIENTS IN OTHER PERMITTED COUNTRIES BIIM1119U-1000783-1/20
Slide 2: Summary
• Trade disputes and geopolitical frictions have become key drivers of the economy and markets. U.S. trade policy has become increasingly unpredictable. Recent geopolitical volatility – including attacks on Saudi oil infrastructure – underscores this message from our Midyear Outlook. • A temporary d
Slide 3: Our 2019 investment themes
Our 2019 investment themes Protectionist push – The substantial escalation in the U.S.-China conflict – and unpredictability of U.S. policy actions – have injected additional uncertainty into business planning, threatening to weaken economic activity. Market implication: We favor reducing risk, incl
Slide 4: Scoring our views
Scoring our views Risk assets have performed strongly this year to date, but geopolitical tensions loom as an ongoing risk. Government bonds have played an important diversification role. Asset performance, 2019 second-half and year-to-date • We have been surprised by the Japan equity extent of the
Slide 5: Multi-decade long spread of globalization reversing
Multi-decade long spread of globalization reversing The surge in trade protectionism marks a sharp reversal from decades of increasing openness. Our nowcast points to further deterioration. Global trade as % of GDP, 1960-2017 BlackRock trade nowcast vs. activity, 2006-2019 60 15 BlackRock trade no
Slide 6: Shock to the system
Shock to the system A key question is whether trade tensions will deliver a “demand shock” or a “supply shock” to the economy. Supply shocks would create upside inflation surprises, marking a change from an extended period of low inflation. U.S. inflation shocks, 1966-2019 Tariff impact on U.S. CPI,
Slide 7: Persistent geopolitical uncertainty
Persistent geopolitical uncertainty Ongoing trade frictions and simmering Gulf tensions underscore the risk of supply shocks. We view the latest détente in U.S.-China trade tensions as temporary as it does not address strategic issues. BlackRock Geopolitical Risk Indicators (BGRIs) for global trade
Slide 8: Stretching the cycle
Stretching the cycle The U.S. economy entered the late stage of its expansion earlier this year. Below-trend growth and monetary policy easing suggests a reversal to mid-cycle conditions in coming months. Output gap and stages of the U.S. business cycle, 1965-2019 4 0 Output gap (%) -4 -8 1965 1971
Slide 9: Even lower for even longer
Even lower for even longer We see the Fed cutting rates further, but not by as much as what markets are pricing in. The ECB has launched open-ended asset purchases, cut rates and strengthened forward guidance. One–year forward central bank policy rate pricing 2.5 FED 2 Fed funds rate midpoint 1.5 In
Slide 10: A confident consumer
A confident consumer The record-long U.S. economic expansion is underpinned by healthy household spending. and looks unlikely to morph into a deeper downturn in the near term. U.S. consumer sentiment vs manufacturing sector, 1985-2019 3 1 0.9 2 0.8 0.7 1 0.6 Z-score 0 0.5 0.4 -1 0.3 0.2 -2 0.1 -3 0
Slide 11: Easy does it
Easy does it Accommodative financing conditions underpin our belief that weakness in the global industrial sector is unlikely to lead to a broader economic downturn in the near term. BlackRock G3 Growth GPS and FCI, 2015-2019 • Easier monetary policy has spurred a swift rebound in our financial 2.3
Slide 12: Hitting the limit
Hitting the limit Monetary policy is almost exhausted as global interest rates plunge towards zero or below. We believe policymakers should lay the groundwork for a credible plan to navigate the next economic shock. US and German yield curves, actual vs recession, 2019 1 • We expect current central
Slide 13: Raising resilience
Raising resilience Government bonds have played an important role in building portfolio resilience – even at ultra-low yields. In Europe, German bunds are less effective shock absorbers as yields approach their perceived floor. Stock-bond correlations in the U.S. and Europe, 2000-2019 United States
Slide 14: Eyes on volatility
Eyes on volatility Relatively muted cross-asset volatility suggests markets are not fully pricing in heightened geopolitical risks. We believe central banks’ dovish pivot is buying investors time to add resilience to portfolios. Cross asset volatility, 2008-2019 6 Equities Oil U.S. Treasuries
Slide 15: Equities through the lens of factors
Equities through the lens of factors The sector-neutral measure of the value factor has lagged significantly, but is recently showing signs of life. The reversal hints at risks of overcrowding, as well as the sensitivity of factor leadership to rates moves. Relative performance of global value vs. m
Slide 16: Market views: equities
Market views: equities We remain positive on U.S. equities on reasonable valuations and the concentration of high-quality companies, but rising geopolitical risks challenge our overall preference for equities over bonds. Sources of equity total return in 2019 20 10 Total return (%) 0 Earnings Multip
Slide 17: Market views: fixed income
Market views: fixed income We like sources of coupon income such as EM local debt, despite outsized returns this year. Valuations appear full in many sectors, with yields still near the bottom of historical ranges. Selected fixed income yields, 2018-2019 8 Range since Jan 2018 Current 6 Yield (%
Slide 18: Assets allocation views in brief
Assets allocation views in brief Six-to-12 month tactical views on selected assets, November 2019 Asset class View Comments ▲ Overweight – Neutral ▼ Underweight U.S. ▲ Abackdrop. supportive policy mix and the prospect of an extended cycle underpin our positive view. Valuations still appear reasonabl
Slide 19: Get BlackRock Investment Institute content
Get BlackRock Investment Institute content: blackrock.com/BII Social content for a U.S. audience: BLKInsights app @blackrock The Bid podcast FOR PUBLIC DISTRIBUTION IN THE U.S., HONG KONG, SINGAPORE AND AUSTRALIA. FOR INSTITUTIONAL, BIIM1119U-1000783-19/20 19 PROFESSIONAL, QUALIFIED INVESTORS AND QU
Slide 20: Important information
Important information General disclosure: This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of November 2019
BlackRock Investment Institute — Q4 2019 Earnings Presentation on 6ix