BlackRock's Li: Goldilocks Outcome for Markets Is 'Off the Table'

well you please assist on the Nuance to change here as you look mid-year to the rest of the year absolutely so we're releasing our second half of the year outlook today and the main theme here is really that we are in a regime change that the great moderation of the past for decades characterized by a steadily growing production and the environments driven by Supply while that is now over because we're now in an environment the the environment driven by the amount was over because we're now in an environment driven by Supply and that means actually the trade-off between growth and inflation is so much tougher in whichever way central banks act either to live with inflation or to fight inflation by hurting growth we're going to be looking at a worse set of outcome for growth and inflation and that is also why through the course of this year we have been incrementally reducing portfolio level risk taking and at this juncture we reduce portfolio level risk further and in this moment we're actually up applying a up in quality adjustment to portfolio by downgrading develop market equities further into underweight and upgrading investment grade into overweight at this juncture so when they talked to me about the future then and the characteristics of this new market regime given everything you've just said is it lower returns and higher volatility as far as the eye can see is that the way you're thinking about things Beyond this year into next year and after that well in this new regime when it comes to investment I think the most important implication to remember is that the Goldilocks outcome is now off the table the Goldilocks outcome whereby you have sustained and joined bull markets in equities and bonds which is very much what characterized recent decades well that is now off the table and when it comes to portfolio construction we're talking about higher risk premium for athletes and bonds we're talking about no Automatic by the diff we're talking about re-evaluating risk models calibrated to history and we're also talking about being more Dynamic when it comes to adjusting portfolios right because Cycles are becoming shorter macro volatility is higher and Market volatility is higher as well so I just mentioned the adjustment that we're making downgrading development market equities and upgrading Global IG investment grade but we do not expect to hold it for an extended period of time one we would access this bear Market when would we when we would become more positive actually that's a super big code that we're very very focused on and was signposting that explicitly in the Outlook as well

Channel: Bloomberg Television

Views: 16,437

Keywords: Bloomberg

Id: UHOZ0eZjfM4

Length: 2min 45sec (165 seconds)

Published: Mon Jul 11 2022