BlackRock: Harder work for investors in new economic order

Anath Levin  credit: Rami Zarnegar
Anath Levin credit: Rami Zarnegar

BlackRock Israel country head Anath Levin: Israeli investors will have to make the effort to identify investments around the world.

The "Paradise" of moderate growth and near-zero interest rates is over. We are at the beginning of a period of sharp macro-economic volatility and exceptional, extreme uncertainty - that is the not very cheering message of US-based global investment giant BlackRock at the opening of its 2024 forecast.

BlackRock’s forecast first and foremost means greater personal effort from investors than in the past; that is, less passive investment in indices and more active research of investment instruments. It says that markets are currently veering between hope of a soft landing by the US economy and fear of a recession, but that the broader trends shaping the economy are a decline in the global workforce, geopolitical fragmentation, and the switch to a low carbon emissions economy.

"Half the world’s population will go to the polls next year"

"There are several main emphases in BlackRock’s forecast," says BlackRock country head in Israel Anath Levin, talking to "Globes". "We are going into a year that will be very political around the world. Half the world’s population will go to the polls. And so the economic message of the forecast is that there is a new economic world order, after the shocks caused by the Covid pandemic, among them the disruption to the production chain."

Levin, who served in a series of senior positions in the past, among them CEO of insurance company Migdal, deputy CEO of Clal Insurance, and deputy CEO of Bank Hapoalim, describes the new order: "We will live with lower growth in the various economies, and a higher-for-longer interest rate regime. Geopolitically, the world is not stable, and it faces a structural change of an ageing population and lower growth rates. We continue to err in estimates of inflation, and hence also in forecasts of interest rate cuts. So far, the inflation figures show that goods prices are indeed falling, which is a kind of leftover form the pandemic, but inflation in services pricing continues to be sticky."

"Huge capital flow from money market funds to stocks"

"On the other hand, something is starting to happen here," Levin says. "The economic picture is becoming clearer, and investment managers are starting to the attractive things. There are stocks of companies for which the multiples at which the are traded have become attractive. We are also seeing a huge flow of money starting to exit the money market funds and move towards investment (in stocks, H.S.)."

BlackRock therefore recommends that investors should adopt what they call "an active approach" to portfolio management, warning that not all asset valuations match the new reality, and that therefore static exposure to broad groups of assets will not yield the same returns as it did in the past, whether in stocks or bonds. In other words, passive tracking of indices is now less attractive than it was, and involves greater risk than in the past.

Recommended: Energy, infrastructure, AI

BlackRock sees a substantial rise in investment in strategic sectors such as technology, energy, defense, and infrastructure, but it warns that geopolitical risk is higher than in the past and needs to be taken into account.

One of the trends that have boosted Wall Street in the last year is the AI revolution. Leading companies in this field such as Nvidia and Microsoft, which invested in OpenAI, had some of the highest returns, and BlackRock believes that this is just the beginning, recommending being overweight on AI stocks in developed markets.

What should the average Israeli do about investment?

Levin: "The average Israel very much leans towards investment in Israel. But the Israeli capital market is mainly dominated by the local banks and real estate. He therefore needs to ask himself whether he thinks that new opportunities have arisen. There’s no choice but to work harder and make the effort to identify investments around the world."

Published by Globes, Israel business news - - on December 18, 2023.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.

Anath Levin  credit: Rami Zarnegar
Anath Levin credit: Rami Zarnegar
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