BlackRock is still overweight U.S. equities

Molly wealth talk joined discussion · Jan 11, 2022 18:02

Virus spike to delay, not derail restart.

The new year has started with a record COVID surge, renewed restrictions and many people working from home again. The difference with this time: The Omicron strain appears less severe in populations with high vaccination and immunity rates.

BlackRock sees Omicron delaying – and not derailing - the powerful restart of economic activity while potentially adding to supply bottlenecks. They stay overweight equities and eye risks that policymakers or markets misread the current surge in inflation.

They find that a surge in cases but a more muted rise in hospitalizations.

Source: BlackRock

Viewing the situation in the recent Omicron hot spot of London as a harbinger of things to come. Case loads spiraled upward to almost double the previous peak in early 2021 (the red line in the chart). Yet hospital admissions have remained 50% below the earlier highwater mark (the yellow line).

Both case loads and hospitalizations in London have started to come down, suggesting the worst of the Omicron wave may be over. We expect other areas to follow a similar pattern over the next couple of months.

BlackRock's bottom line: Preferring equities and would use COVID-related selloffs to add to risk.

They are still overweight U.S. equities on still strong earnings momentum and do not see gradual policy normalization posing significant headwinds.