BlackRock Adjusts US Debt Rating to Overweight, Downgrades US Stock Rating to Neutral

On October 13, BlackRock adjusted its asset allocation for the United States, raising the rating for short-term US Treasury bonds to overweight and upgrading long-term US Treasuries from underweight to neutral, ending a nearly six-year underweight stance on US debt. At the same time, the rating for US stocks was downgraded from overweight to neutral, and the rating for US agency mortgage-backed securities (MBS) was lowered to neutral, while reducing the underweight position in Japanese government bonds. BlackRock had maintained an underweight position on US Treasuries since October 2020, when the yield on the 10-year Treasury was close to 0.9%, which has now risen to over 5.2%. The firm believes that yields have reached an attractive level and aims to lock in some higher returns. The interest rate swap market reflects that traders expect at least three rate hikes of 25 basis points each over the next 12 months. BlackRock noted that US Treasury yields need to rise another 75 basis points over the next 12 months to fully offset the earnings from bonds. The downgrade of the US stock rating by BlackRock is attributed to potential volatility brought about by artificial intelligence developments, emphasizing the management of recent risks rather than changing core beliefs, while remaining optimistic about AI-related companies and listed infrastructure, preparing to increase risk exposure again when visibility improves.

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