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Where BlackRock Sees Opportunities in 2024

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Bloomberg Dec 6, 2023 00:01 · 10.9k Views

BlackRock Global Chief Investment Strategist Wei Li discusses BlackRock's 2024 global outlook with Jonathan Ferro on "Bloomberg The Open."

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Transcript

  • 00:00 Black Rock out with its 2024 outlook, recommending investors seize opportunities within the changing environment.
  • 00:05 Here's the quote from them.
  • 00:06 The new regime of greater macro and market volatility has resulted in a dispersion of returns.
  • 00:12 We believe an active approach to managing portfolios will carry greater rewards, a sea change from the one and done asset allocations that works so well during the Great Moderation.
  • 00:21 That.
  • 00:22 Is over, and it's time to seize opportunities the new regime
  • 00:26 has to offer.
  • 00:27 Like what's Ray Whaley joins us right now?
  • 00:29 Way.
  • 00:29 Let's talk about that new regime, that title
  • 00:32 grabbing the wheel.
  • 00:34 Whaley, what's changed?
  • 00:37 Well, as we look ahead to 2024, as we think about outlook, context is
  • 00:43 is everything.
  • 00:44 So early on I heard multiple
  • 00:46 references to landing and if you look at
  • 00:49 the economic
  • 00:50 activities more recently compared to a normal expansion, it feels like a strong expansion.
  • 00:55 But if we zoom out
  • 00:57 actually we're still at pre pandemic levels.
  • 01:00 So nothing is flying, there is no landing.
  • 01:03 We're just climbing out of our.
  • 01:05 Whole and ultimately what this means is that
  • 01:08 we don't need a.
  • 01:10 Recession as a result of that.
  • 01:12 But the bigger point is really that we're now in a different macro environment, an environment where
  • 01:19 we do want to put
  • 01:20 money to work and it's even more important to do that.
  • 01:23 But the reward for being active is greater, for being selective is greater, which is how we're thinking about
  • 01:29 implementing the themes for 2024.
  • 01:32 A part of your approach is to harness mega forces.
  • 01:35 There's five of them, five themes I believe.
  • 01:37 One is
  • 01:37 AI
  • 01:38 of those forces, Wayne Lee, do you think the focus is going to be on things here in the United States?
  • 01:42 Does that dominance around that tech story continue?
  • 01:47 We currently still have
  • 01:49 a
  • 01:49 overweight in the DM
  • 01:51 tech and
  • 01:52 AI Megaforce which has been a long held overweight in our portfolio.
  • 01:57 As we think about opportunities in this particular Megaforce, we have to think about the multiple stacks where
  • 02:03 AI can have an impact.
  • 02:04 You start
  • 02:05 from the semis and the chips to the foundational model, the data center infrastructure
  • 02:10 as well as all the way to the third
  • 02:12 kind of stack around applications.
  • 02:14 So far, if we look at the performance of the Magnificent 7, they almost doubled.
  • 02:19 So clearly this
  • 02:21 theme has already played out very well, but we see future further
  • 02:26 stacks
  • 02:27 providing greater runway for this theme, which is why we're still
  • 02:30 overweight in this in this exposure
  • 02:33 and earnings are coming through.
  • 02:34 And looking ahead
  • 02:35 to 2024, tech is expected
  • 02:38 to carry more than 50% of the earnings growth for next year.
  • 02:43 So certainly this is different from
  • 02:45 the.com bubble.
  • 02:45 We do think that there is more runway, which is why we're still
  • 02:48 overweight.
  • 02:49 And as we think about the broader U.S.
  • 02:51 equity allocation,
  • 02:53 whilst we have a underweight to the
  • 02:55 overall benchmark, the overweight in AI and tech actually takes us
  • 03:01 close to
  • 03:02 neutral allocation.
  • 03:04 And on top of that, you consider the greater alpha opportunities as selective in this environment versus the period after global financial crisis where central banks were taking out a lot of macro uncertainty
  • 03:15 with their forward guidance.
  • 03:17 Now the room for having differentiated view,
  • 03:20 the reward for that is greater and the room for that is greater.
  • 03:23 So we certainly want to think about being more deliberate and selective as we think about investing in 2024.
  • 03:29 Well, you alluded to it just then.
  • 03:30 You're not exactly build up aggressively on U.S.
  • 03:33 equity markets just geographically.
  • 03:35 Is it time to look outside
  • 03:37 of America after a period again
  • 03:39 of absolute dominance and exceptionalism?
  • 03:43 Well
  • 03:44 with the
  • 03:45 overall close to neutral allocation to U.S.
  • 03:48 equity market in
  • 03:49 including the AI allocation and potential
  • 03:53 alpha selectivity opportunity, We also see opportunities outside of
  • 03:58 the US exactly
  • 03:59 as you
  • 04:00 as you say.
  • 04:01 So if you think about Japan for example, which is a country that we have liked
  • 04:06 for most part of this year, we upgraded
  • 04:08 twice
  • 04:09 through the course of 2024 but 2023.
  • 04:12 But we think that this has more room to run, but we like it on the currency on hedged basis.
  • 04:17 As we think about the prospect of exiting from
  • 04:20 control,
  • 04:21 we also like well emerging market is interesting and increasingly we get questions around emerging market X China.
  • 04:28 So here we look at countries like Mexico, countries like India that are actually benefiting from the crosscurrents of some of the
  • 04:36 mega forces that we have identified
  • 04:39 including.
  • 04:40 Aging population.
  • 04:40 They have younger population, including
  • 04:43 digitalization trends.
  • 04:45 But of course in this market evaluation has run up.
  • 04:48 So we even want to be more selective within these exposures as well.
  • 04:52 But certainly we want to think about pushing against the home bias tendency as we think about geopolitical,
  • 04:59 geographical as well diversification for 2024.