BlackRock Sees ‘New Global Growth Regime’

By Amey Stone

Times are changing and Richard Turnill, BlackRock’s global chief investment strategist, thinks investors should have more appetite for risk assets. In a new commentary, he suggests equities and corporate credit will do better than government bonds as global growth picks up.

Here are his three key points:

• The global economy appears to be nearing an inflection point, favoring credit and equity relative to long-term government bonds.
• Upbeat economic data last week indicated global growth is holding up, but European bank woes depressed stocks for much of the week.
• U.S. jobs data this week could confirm a December Federal Reserve interest rate increase is the most likely scenario.

He’s not exactly bullish. He sees a December rate hike and plenty of political risk. He writes:

Upcoming political events pose risks to our outlook, so we advocate exposure to portfolio hedges such as gold and short-term Treasuries. We have a cautious view toward long-term government bonds as well as assets facing structural headwinds, such as European banks.

Turnhill sums up:

High valuations versus history point to more muted future returns across most asset classes. However, investors are still being rewarded for taking on risk in many areas of equities and credit, especially given the poor compensation for risk in government bonds. Higher-yielding risk assets such as local emerging market (EM) bonds look relatively attractive.