World's Largest Asset Manager Turns Bullish On Stocks Amid Signs Of Soft Landing: 'We Expect The Rally To Broaden'

The world’s largest asset manager BlackRock Inc has demonstrated an optimistic outlook on U.S. stocks, predicting a forthcoming economic soft landing.

What Happened: BlackRock, which is managing $10 trillion in assets, has upgraded its U.S. stocks rating from “underweight” to “overweight.” The asset manager’s bullish stance is projected over a six to 12-month period, contingent on the success of the Federal Reserve in instigating an economic soft landing. This is expected to be succeeded by the first interest rate cut since 2019, according to a Business Insider report on Tuesday.

Jean Boivin, a market strategist at BlackRock, expressed, “We expect the rally to broaden out as inflation falls further, the Fed starts to cut rates, and the market sticks to its rosy macro outlook.”

Boivin’s shift in outlook was significantly influenced by the growing market consensus that a recession will be evaded in 2024, replicating the situations in 2023 and 2022, despite a surge in bearish forecasts. While this year might witness a resurgence in inflation leading to increased market volatility, BlackRock primarily predicts the inflation rate to be in line with the Fed’s long-term 2% target. However, Boivin has warned investors to brace for an “inflation rollercoaster” in 2025.

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Why It Matters: The discourse around a possible economic soft landing has been a topic of contention. Former Treasury Secretary Larry Summers advised caution, asserting that inflation continues to pose significant risks.

This viewpoint was echoed by Richmond Federal Reserve President Tom Barkin in early January, where he expressed cautious optimism about a potential soft landing but did not rule out further rate hikes.

However, economists were increasingly hopeful for a soft landing of the U.S. economy and potential Federal Reserve rate cuts, despite the challenges in forecasting during the post-pandemic period.

This optimism aligns with BlackRock’s current stance, albeit with an acknowledgment of the geopolitical volatility that could impact global markets.

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