BlackRock Investment Institute Videos

Market take

Weekly video_20250929

Serena Jiang

Economist

BlackRock Investment Institute

Opening frame: What’s driving markets? Market take

Camera frame

Japanese stocks are still among our favorites. Corporate governance reforms are translating into tangible shareholder gains. We also see the AI theme playing out globally.

Title slide: Why we still like Japan in global stocks

1: Foreign investors step in

Corporate reforms are delivering results for shareholders of Japanese stocks. For decades, Japan’s companies held a sizeable portion of each other’s stocks. The practice cemented ties between companies, but it also allowed them to resist pressure to improve performance and deterred outside investors.

That’s now changed. Foreign investment in Japanese stocks has increased. And share buybacks – a clear sign of reform taking root – have surged. The first eight months of this year have already seen almost as many buybacks as last year’s total.  

2: Overweight equities, underweight bonds

Our long-held preference for Japanese equities has delivered. Corporate return on equity is now near its highest level in four decades. We think this can continue as we see the Bank of Japan remains cautious in its policy normalization.

We should have greater clarity on policy after the upcoming election for the leader of the Liberal Democratic Party. The top two candidates, Shinjiro Koizumi and Sanae Takaichi, differ on monetary policy, but both back looser fiscal policy. That could push long-term yields higher, since Japan’s debt is already more than double the size of its GDP. Accordingly, we stay underweight government bonds.

3: Tracking the AI theme

We see the AI theme playing out – both in Japan and globally.

In Japan, AI is key to addressing demographic challenges and builds on the country’s strength in robotics, automation and semiconductor materials.

The AI theme has also been an important driver of returns in mainland China, Taiwan and South Korea, each developing models or providing components for the AI buildout. And it continues to drive U.S. equities.

Outro: Here’s our Market take

Japan’s ongoing reform progress is boosting corporate performance and returns. We stay overweight Japanese equities and underweight bonds. We also see signs of the AI theme playing out globally that keep us positive.

Closing frame: Read details: blackrock.com/weekly-commentary

BlackRock Bottom Line: 2024 Global outlook

Speaker: Wei Li, Global Chief Investment Strategist, BlackRock Investment Institute

Script:

Higher interest rates and greater volatility define the new regime we’re in. In turn, that’s creating greater dispersion of returns.

We think investors will benefit from taking a more active approach to portfolios as we head into next year. 

Here’s our three investment themes for 2024: number one, managing macro risk; number two, steering portfolio outcomes; and number three, harnessing mega forces.

BlackRock Bottom Line open

Title: BlackRock Investment Institute 2024 global outlook

Our first theme is managing macro risk. Production constraints mean central banks face tougher trade-offs between inflation and growth – they can’t respond to faltering growth like before. This leads to a wider set of outcomes and a more uncertain macro outlook.

We don’t think investors should wait for the macro environment to improve. Instead, they should look to neutralize macro exposures or be very deliberate about which risks they take.

Our second theme is steering portfolio outcomes. We believe the new regime rewards an active approach to portfolios. Greater volatility and dispersion of returns create space for investment expertise to shine – that involves being more dynamic with indexing and alpha-seeking strategies, while staying selective.

Our third theme is harnessing mega forces. We see five structural shifts reshaping markets and driving returns now and in the future. We think they have become important portfolio building blocks on their own.

The bottom line is: Going into 2024 in the new regime, we want to put money to work. We believe investors should take a more active approach to their portfolios and be deliberate in taking portfolio risk.