Blackrock, Inc. · NYSE:BLK
Blackrock — BlackRock Investment Institute — Investor Presentation (December 2019)
26 slides from Blackrock's investor presentation, December 2019
Slide 1: Global Outlook - Testing limits
December 2019 Global Outlook - Testing limits FOR PUBLIC DISTRIBUTION IN THE U.S., HONG KONG, SINGAPORE AND AUSTRALIA. FOR INSTITUTIONAL, PROFESSIONAL, QUALIFIED INVESTORS AND QUALIFIED CLIENTS IN OTHER PERMITTED COUNTRIES BIIM1219U-1042565-1/26
Slide 2: Our 2020 investment themes
Our 2020 investment themes Growth edges up – We see an inflection point as global economic growth edges higher in 2020 thanks to easy financial conditions, limiting recession risks. The growth mix is shifting as the modest pickup is likely to be led by manufacturing, business spending and interest r
Slide 3: Easy financial conditions should translate into growth
Easy financial conditions should translate into growth We see growth led by a recovery in global manufacturing and interest rate-sensitive sectors. Underappreciated risks around higher inflation temper our overall pro-risk stance. BlackRock G3 FCI and Growth GPS, 2010-2020 3.5 FCI-implied growth
Slide 4: The U.S. economic expansion is intact
The U.S. economic expansion is intact We see a limited pickup that pushes the economy back to the late-cycle norm of trend-like growth. The record-long U.S. economic expansion is underpinned by healthy household spending. Output gap and stages of the U.S. business cycle, 1965-2019 6 1 0.9 0.8 2 0.7
Slide 5: Central banks' dovish pivot has likely run its course
Central banks’ dovish pivot has likely run its course We see the current policy setting supportive of growth yet don’t see monetary policy as a 2020 story. Emerging markets still have room to provide stimulus, but the U.S. dovish pivot is over for now. Central bank policy rates and 1-year/1-year for
Slide 6: Moving the wrong way
Moving the wrong way The policy debate is poised to shift from monetary to fiscal stimulus. On current projections, the policy outlook appears limited. Yet risk to fiscal support is on the upside. Monetary and fiscal impulse in G3 plus China, 2002-2020 Tighter fiscal and easier monetary Coordinated
Slide 7: A limited outlook for fiscal stimulus
A limited outlook for fiscal stimulus Even modest shifts toward fiscal easing could have an outsized market impact. We see upside risks to fiscal stimulus – and uncertainty over U.S. fiscal policy will be high heading into the election. Global fiscal impulse from G3 and China, 2002-2020 2.5 U.S.
Slide 8: Eyes on inflation risks
Eyes on inflation risks Tight labor markets, rising wages and sluggish productivity growth could stoke inflation. A disruption of global supply chains could lead to inflationary supply shocks. Changes and components in U.S. GDP deflator, 2000-2020 6 GDP deflator Unit labor cost Capital expense
Slide 9: Profit margins under pressure
Profit margins under pressure A broad measure of U.S. corporate profit margins has fallen sharply from its peaks. The potential for further margin compression and downward earnings revisions is a risk for equities. U.S. corporate profits over the business cycle, 1965-2019 1 20 0.9 0.8 0.7 Profit mar
Slide 10: Understanding macro regimes
Understanding macro regimes We could shift into a Goldilocks regime if growth accelerates and inflation moderates – a positive for risk asset returns. The risk: a growth undershoot coupled with rising inflationary pressures. Current regime Slowdown: Decelerating growth and inflation; rising uncertai
Slide 11: Setting the scene
Setting the scene Both global stocks and bonds posted relatively healthy gains in 2019. This follows an atypical 2018 when both fell in tandem – only the second such occurrence since 1991. Annual asset performance, 1991-2019 40 2009 2003 30 1999 2013 2019 YTD 2017 1993 2006 1998 20 1991 1995 2012 Gl
Slide 12: Scoring our views
Scoring our views Risk assets have performed strongly in 2019 despite the blows from trade tensions and geopolitical risks. Government bonds have also performed well – and played an important diversification role. Asset performance, 2019 second-half and year-to-date 2019 Tactical Views Underweight O
Slide 13: Directional views
Directional views Tactical views on major global asset classes from a U.S. dollar perspective, December 2019 Asset Underweight Neutral Overweight We remain modestly overweight on equities. With central bank easing and expansion in valuation multiples Equities largely behind us, we expect a growth up
Slide 14: Equity risk premium
Equity risk premium Compensation for equity risk looks reasonable compared with previous periods of stretched valuations. Equity risk premia, 1995-2019 12% 8% Equity risk premium 4% U.S. Europe 0% Japan Emerging markets -4% 1995 1999 2002 2005 2009 2012 2015 2019 Past performance is not a re
Slide 15: Reasons to like inflation-linked bonds
Reasons to like inflation-linked bonds U.S. Treasury inflation-protected securities (TIPS) offer some diversification during both growth and inflation shocks. Average asset returns under inflation and growth shocks, 1997-2019 4% TIPS Government bonds 3% Equities 2% 1% 0% -1% -2% -3% -4% Inflat
Slide 16: Market attention to geopolitical risks remains high
Market attention to geopolitical risks remains high We view the latest lull in U.S.-China trade tensions as temporary as it does not address strategic issues. A breakdown of talks could revive protectionist pressures and undermine sentiment. BlackRock Geopolitical Risk Indicator, 2006-2019 4 U.S.-Ch
Slide 17: China fiscal outlook also limited
China fiscal outlook also limited We see little appetite in China for large-scale stimulus that has buoyed the global economy in the past. Our baseline expectation is for China’s fiscal impulse to peter out next year. China’s credit and fiscal impulses, Growth GPS, 2013-2020 54 6% China Growth GPS
Slide 18: Risk of a supply shock
Risk of a supply shock The primary risk to the outlook is a stubborn mix of slower growth and rising inflation. Secular trends such as deglobalization and moves towards sustainable business models could prompt a regime shift. Stock-bond correlations under different shocks, 1965-2019 1.8 1 Stock-bo
Slide 19: Government bonds testing limits
Government bonds testing limits The negative stock-bond correlation is crucial for diversification in multi-asset portfolios. If the correlation becomes less negative near the lower bound on yields, bond allocations should shrink. Hypothetical government bond allocation under different stock-bond co
Slide 20: Granular tactical views
Granular tactical views Change in view Tactical views on selected assets vs. broad global asset classes by level of conviction, December 2019 Previous New Asset Underweight Overweight We have downgraded U.S. equities to neutral. Rising uncertainty around the 2020 election and a wide United States ra
Slide 21: Tactically liking Japanese equities
Tactically liking Japanese equities A stabilization in global industrial production boosts the appeal of assets geared to a cyclical bounce. We see the lull in U.S.-China trade tensions as another reason to be tactically positive on Japan. Japanese equities vs. developed market U.S. dollar total ret
Slide 22: Revising our factor views
Revising our factor views We are more constructive on the value style factor now due to its pro-cyclical nature and a steepening yield curve. We like the quality factor as it is typically resilient to late-cycle risks. Value vs. momentum factor, 2017-2019 4 0 Relative performance (%) -4 -8 -12 Nov-1
Slide 23: The importance of income
The importance of income We prefer EM local- and hard-currency debt and U.S. high yield over global investment grade credit. Selected higher-yielding fixed income vs. U.S. investment grade, 2009-2019 U.S. investment grade Equally weighted average of EM local, EM hard currency debt and US high yi
Slide 24: Preferring EM debt and high yield
Preferring EM debt and high yield We like sources of coupon income from higher-yielding asset classes, even as all-in yields remain near the bottom of recent ranges. Selected fixed income yields, 2018-2019 8 Range since Jan 2018 Current 6 Yield (%) 4 2 0 European U.S. 2-year U.S. 10-year U.S. in
Slide 25: 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 Alexa and Google Assistant FOR PUBLIC DISTRIBUTION IN THE U.S., HONG KONG, SINGAPORE AND AUSTRALIA. FOR INSTITUTIONAL, BIIM1219U-1042565-25/26 25 PROFESSIONAL,
Slide 26: 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 December 2019
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