A good buying opportunity into a stock market well off its highs has taken shape, argues BlackRock Investment Institute Global Chief Investment Strategist Wei Li and her team.
The rationale: the escalating situation between Russia and the West will likely mean a slower pace of interest rate hikes from global central banks.
“We see fast-rising energy prices exacerbating supply-driven inflation, both delaying and raising its peak. We think central banks will need to normalize policy to pre-Covid settings, and that they will find it tough to respond to any slowdown in growth. In other words, policy rates are headed higher. Yet central banks may face less political pressure to contain inflation as the conflict becomes an easy culprit for higher prices. We believe this will allow them to move more cautiously as they raise rates, especially the ECB. Our conclusion: The invasion has reduced the biggest risk to our investment thesis – policymakers slamming on the brakes or markets thinking they will,” said the BlackRock team in a new note on Monday.
The strategy group subsequently “tactically” upgraded its view on stocks while downgrading credit.
To be sure, investors continue to voice their concerns on both the outlooks for inflation, interest rates and the Russia/Ukraine crisis.
The Dow Jones Industrial Average (^DJI) tanked more than 300 points today as the West slapped Russian banks with severe sanctions. The S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) were also in the red by early afternoon. Travel stocks such as Delta (DAL), JetBlue (JBLU) and Hilton (HLT) were hit on the unfavorable news flow, too.
Brent crude oil popped 5% to above $102 a barrel amid fears of Russia retaliating by curtailing its energy production to the rest of the world.
But as market pros often say, “It takes two to make a market.”
And while a money managing giant like BlackRock sees a buying opportunity for stocks here, PIMCO is taking a touch more defensive stance.
“We have taken down risk slightly. That is really just to take some chips off the table, to be be patient and wait for better entry points. I do think the market is starting to look more attractive,” said PIMCO Portfolio Manager Erin Browne on Yahoo Finance Live. “I want to be patient and wait for the dust to settle, wait for more clarity with regard to Russia, and then we will start to nibble back into the market.”