Investors may need to rethink the most basic principles of portfolio management as artificial intelligence, geopolitical tensions and other structural shifts reshape markets, according to the BlackRock Investment Institute. The asset manager argued that traditional portfolio construction methods are becoming less effective in an investment environment increasingly driven by what it calls “mega forces” — long-term changes ranging from AI and demographic shifts to geopolitical fragmentation and the energy transition. “We think this means investors should revisit big portfolio calls more often and have an explicit plan B portfolio ready,” BII strategists led by Jean Boivin said. Among its highest-conviction tactical calls, BlackRock remains bullish on assets tied to the AI boom. It favors infrastructure and equipment supporting the AI buildout, including semiconductors, power systems and data centers, arguing these areas stand to benefit regardless of which companies ultimately emerge as winners. The firm also maintains an overweight position on U.S. equities, citing resilient earnings growth and expectations that AI will continue to boost corporate profits. In emerging markets, BlackRock prefers countries that manufacture critical AI components as well as commodity exporters that could benefit from higher energy and raw-material prices. The asset manager also suggested investors look beyond where a company is listed when making investment decisions. Instead, it said, greater emphasis should be placed on understanding a company’s business model and revenue drivers. “What matters more is what a company actually does and the drivers of its revenue, not the country where its stock happens to be listed,” BlackRock said. On fixed income, the asset manager is steering investors away from long-duration government debt. It is underweight long-term U.S. Treasurys, noting that inflation risks and rising term premiums continue to put upward pressure on yields. It also remains underweight Japanese government bonds, expecting further increases in yields as interest rates rise and bond issuance remains heavy. Instead, BlackRock favors emerging-market hard-currency debt, particularly countries with strong exposure to commodities. It also prefers U.S. agency mortgage-backed securities, which it says offer higher income than Treasurys while maintaining similar risk characteristics. The asset manager favors infrastructure equity and private credit over the longer term, citing demand generated by AI and geopolitical fragmentation: “We still like private credit but see an increase in dispersion of returns.”
