BlackRock upgraded its U.S. stock outlook from neutral to overweight on Monday, anticipating continued upward momentum for the S&P 500 over the next six to 12 months. This shift is driven by expectations of cooling inflation and potential interest-rate cuts by the Federal Reserve. The asset manager foresees the tech-led market rally expanding as inflation decreases, the Fed considers rate cuts, and a positive macroeconomic outlook persists.
According to Jean Boivin, head of the BlackRock Investment Institute, the market is currently pricing in a scenario of soft economic growth with a 2% inflation rate and no recession. This narrative is expected to support the ongoing rally and facilitate a broader market performance beyond the tech sector.
While the S&P 500 closed at a record high for the fifth consecutive trading day, BlackRock remains prepared to adapt to evolving market conditions. Despite the positive indicators, uncertainties persist, including the potential challenge to the consensus view of a soft economic landing and the likelihood of inflation resurgence in the long term.
Looking ahead, BlackRock acknowledges the short-term outlook for inflation to hover around 2% but anticipates a rise to near 3% by 2025 due to robust U.S. wage growth. This projection underscores the need for vigilance and adaptability in navigating market fluctuations.
On Monday, U.S. stocks closed higher, with the S&P 500 reaching another record high amidst anticipation of key events such as the Fed’s policy decision, tech giants’ earnings reports, and the release of crucial U.S. employment data. The S&P 500 ended the day up 0.8%, closing at 4,927.93, while the Dow Jones Industrial Average and the Nasdaq Composite also posted gains of 0.6% and over 1%, respectively, according to FactSet data.
