When BlackRock (BLK) gets more bearish on stocks, it’s a red flag to toss onto the investing field.
The world’s largest asset manager on Tuesday upgraded its views on US Treasurys, preferring short-term bonds as higher yields improve potential. The research was conducted by BlackRock’s Jean Boivin, Rick Rieder, and Wei Li.
In turn, the team downgraded its views on US stocks to Neutral.
“Higher yields and potentially excessive Fed tightening expectations create room to unwind our U.S. Treasury underweight — a mainstay for most of the last six years,” BlackRock’s team said. “We upgrade Treasuries, favoring short-term bonds. In turn, we take profits: downgrading U.S. equities to neutral to manage potential volatility around the AI buildout.”
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They remain optimistic on AI stocks, however, despite the fresh concerns.
“We retain our conviction in AI fundamentals and preference for AI within U.S. equities,” the strategists added.
BlackRock’s downgrade in stocks comes at a precarious time for the market’s non-AI areas. Sell-offs have gained steam amid the push higher in US Treasury yields, which has raised the cost of capital for companies that may not be growing as fast as AI companies.
About 84% of S&P 500 (^GSPC) stocks are now trading at least 10% below their all-time highs, according to new analysis from the Kobeissi Letter.
What’s more, 59% of S&P 500 stocks are down at least 20% from their highs, 41% are down more than 30%, and 17% are off by more than 50%.
“I would say [it’s] not a crisis but an eye-opener, and it’s something I think you’ve got to think about,” Rieder said about the move in yields on Sozzi Unleashed in late September.
Brian Sozzi is Yahoo Finance’s Executive Editor, host of the Sozzi Unleashed morning show and the Power Players with Brian Sozzi podcast, and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
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