LONDON (Reuters) – World’s largest asset manager BlackRock has reduced its position in government bonds, preferring stocks in light of COVID-19 vaccine rollout and potentially up to 2.8 trillion dollars in additional budgetary spending in the United States this year.
In a weekly commentary, strategists from the BlackRock Investment Institute said the company was increasing its “underweight” to US Treasuries. Yields on U.S. Treasuries, which move inversely to price, hit their highest level since February 2020 this week as investors sold government bonds.
The asset manager also said he was raising European stocks to a “ neutral ” level, noting that there was room for the market to close a valuation gap with the rest of the world. He downgraded the eurozone’s credit rating and peripheral bonds and rated them “neutral”.
BlackRock also said it has called for an “ overweight ” in UK stocks following Brexit, while maintaining its overweight in US and emerging market stocks and underweight in Japanese stocks.
Britain’s FTSE 100 and FTSE 250 have underperformed global stock indices since the start of 2016, when the country voted to leave the European Union.
“We expect our new nominal theme of stronger growth and a moderate response of nominal bond yields to higher inflation to continue, even after significant market moves,” BII strategists said in the note. .
“This reinforces our tactically pro-risk position. A major risk is a further increase in long-term returns as markets grapple with an economic rebound that could exceed expectations.
“It could trigger bouts of volatility, although we think the Fed would lean against any sharp moves for now.”
Reporting by Ritvik Carvalho; edited by Marc Jones