Where to look in Q2 amid 'choppier' markets: BlackRock

Against the current market backdrop, BlackRock is favouring U.S. and emerging market equities for Q2. Market-moving factors to watch include synchronized global growth, rising inflation and interest rates, higher volatility and broad-based economic uncertainty.

In particular, the firm identifies rising U.S. protectionism as a “menace” in its Global Investment Outlook for Q2 2018. However, it adds, while U.S. moves against China and other countries could spark “bouts of volatility,” the economic and market backdrop should remain “benign.”

BlackRock also expects that a spike in bond yields could pose as a risk but predicts “equities can do well as long as yields are steady and driven by improving growth.”

Read: What’s ahead for Canadian and U.S. equities

Despite favouring U.S. and emerging market equities, BlackRock is preparing for “choppier markets and less-heady returns” compared to 2017. The firm is looking at technology picks and financials, and will focus on momentum investing in the quarter ahead (i.e., taking positions based on assets based on how they’re reacting to upward and downward price trends.)

The firm is negative on government bonds overall, and “neutral on credit amid tight spreads and increasing sensitivity to rate rises.” One bright light, it says, is that short-maturity Treasurys as likely to have a “compelling risk/reward proposition.”

Read the full report here.

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