BlackRock Ends Treasury Underweight, Cuts U.S. Stocks to Neutral

BlackRock Investment Institute ended its nearly six-year underweight stance on U.S. Treasurys and cut its rating on U.S. equities to neutral, citing more attractive bond yields and rising near-term risks for stocks.

The institute raised short-term U.S. government debt to overweight and moved long-term Treasurys from underweight to neutral. It also lowered its rating on U.S. agency mortgage-backed securities.

U.S. Treasury yields have climbed to levels not seen in more than two decades, making fixed-income returns more attractive. Interest-rate swap markets are pricing expectations for at least 75 basis points of additional Federal Reserve rate increases over the next 12 months.

BlackRock said rising capital spending and financing needs tied to artificial intelligence infrastructure could increase short-term volatility in U.S. equities. The allocation changes are intended to manage near-term risks and do not change the institute’s long-term positive view of AI.

The changes shift BlackRock’s U.S. asset-allocation stance toward short-term Treasurys and away from U.S. equities.