Strategists at BlackRock Investment Institute said on Monday the firm cut its exposure to developed-market stocks, citing aggressive intervention by central banks to tame rising prices across the global economy. “Currently, we believe the Fed is locked in responding to political pressures to rein in inflation,” strategists led by Jean Boivin said in a note published on Monday. “Eventually, the damage to growth and jobs from fighting inflation will become apparent, in our view, and central banks will live with higher inflation.” BlackRock’s assets under management topped $10 trillion at the end of last year, making it the world’s largest asset manager. In a similar comment last month, BlackRock strategists argued that the US central bank’s rate hike campaign was poised to stall economic growth without necessarily resolving inflationary pressures. The company argued that high nuclear inflation was due to “abnormally low capacity in an incomplete post-pandemic restart” rather than overheating demand. As a result of its downgraded view on stocks, BlackRock also said that traditional 60/40 stock portfolios and “buying the dip” – or reflexively buying stocks after a short-term decline – are no longer likely to be effective investment strategies . The company said it increased its allocation to investment-grade credit while reducing its stake in equities. “We see a new era of volatile inflation and growth pushing aside a period of moderation,” the firm said in a comment on Monday. “We are downgrading stocks and upgrading credit in this new regime.” The downwardly revised outlook comes a little more than a week after stocks ended their biggest first-half decline in more than five decades. The first six months of the year saw the S&P 500 enter a bear market, and that slump prompted other major Wall Street institutions to cut their price targets for the benchmark. The story continues A trader works at the New York Stock Exchange (NYSE) in New York, U.S., June 22, 2022. REUTERS/Brendan McDermid Among the firms that cut their outlook for the stock was Credit Suisse, whose chief US equity strategist Jonathan Golub cut his year-end estimate for the S&P 500 by 600 points to 4,300 in a note to clients on the 5th of July. Although the new target implies a rally through the rest of 2022, the number marks a sharp rebound from a December 2021 research report in which the bank raised its target for the benchmark US index to 5,200 from 5,000, citing a “robust” economic development. The S&P 500 closed Friday’s session high at 3,899. Even the most bullish street strategist appears less bullish. Oppenheimer Asset Management chief investment strategist John Stoltzfus on Thursday cut his year-end price target on the S&P 500 to 4,800 from 5,330. Prior to the change, Stoltzfus maintained the highest year-end price target among Wall Street strategists tracked by Yahoo Finance, reiterating the call as recently as June 21. Meanwhile, Citigroup ( C ) strategist Scott Chronert said in a note to clients Monday that he sees the S&P 500 rallying about 8% from current levels to end the year at 4,200. “We cut most developed market stocks to a tactical underweight,” BlackRock said, attributing the downgrade to heightened macroeconomic volatility as “central banks appear poised to curb inflation by crushing growth,” BlackRock said. However, the institution reiterated its preference for equities over bonds over the long term as yields rise and inflationary trends pick up. “We think central banks will live with higher inflation, pause and then reverse course on their rate hikes – a boon for equities,” the strategists said. — Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc Click here for the latest stock market news and in-depth analysis, including the events that move stocks Read the latest financial and business news from Yahoo Finance Download the Yahoo Finance app for Apple or Android Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn and YouTube
