By Davide Barbuscia
NEW YORK (Reuters) -The BlackRock Investment Institute (BII) said on Tuesday that growing uncertainty around traditionally stable, long-term economic trends is pushing it toward shorter-term strategies amid an increasingly unclear global economic outlook.
For decades, markets have relied on core principles such as inflation stability, government fiscal discipline, central bank independence, and the safe-haven status of U.S. assets like the dollar and Treasuries. But investor confidence in these foundations has been shaken this year by U.S. tariffs, concerns over the future political independence of the Federal Reserve, and a broad re-evaluation of exposure to U.S. assets as U.S. President Donald Trump moves to reshape global trade dynamics.
“Longer term, with macro anchors lost, no one knows where the global economy is ultimately headed,” BII, a division of U.S.-based BlackRock focused on investment research, said in a mid-year 2025 global investment outlook note.
“That’s why, for now, we invest in the here and now – and lean more on our tactical six- to 12-month horizon,” it said.
The institute’s investment outlooks are based on views from senior portfolio managers and investment executives at BlackRock, which is the world’s largest asset manager.
BII said it has turned more optimistic on government bonds in the euro area over the next six to 12 months. In equities, it continues to favor U.S. stocks over their European counterparts.
Higher government spending in Europe could support the aerospace, defense, and financial sectors. But U.S. stocks are expected to outperform, driven by the artificial intelligence boom and demand for technology, even if tariffs will be a drag on the economy, it said.
Tariffs and slowing U.S. immigration are expected to maintain upward pressure on inflation, limiting the Federal Reserve’s ability to cut interest rates, BII said.
The institute kept a bearish stance on long-dated U.S. Treasuries and shifted from an “underweight” to a “neutral” view on emerging market local currency debt after the dollar lost about 10% this year against major currencies.
“The potential for a further U.S. dollar retreat and brighter emerging market (EM) growth outlook make local currency EM bonds more attractive in a whole portfolio context,” it said.
(Reporting by Davide Barbuscia; Editing by Anna Driver)
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