Many in the economic community have been caught off guard by the developments of the past year. American inflation has decreased without a slowdown in economic growth, and several classic recession indicators have been wrong. According to Blackrock, this is a sign that we are not currently in a normal business cycle, but rather in a highly unusual environment where the economy is undergoing a historic transformation.
“Historical trends are permanently broken when mega-forces, such as the rise of AI, transform the economy. […] This fundamentally different playing field is changing the investment environment fundamentally,” writes Blackrock.
The American fund giant estimates that the expansion of AI infrastructure such as data centers and chips could lead to annual investments of $700 billion by the end of the decade. In addition, $3.5 trillion is expected to be invested each year to meet the increasing demand for energy. Therefore, Blackrock advocates for exposure to companies in the construction and infrastructure sectors over the next five years.
“AI and the transition to a low-carbon economy require investments that could potentially be compared to the Industrial Revolution,” the fund giant writes.
### Daring to Take Risks
The company’s key strategy for 2025 is to dare to “take risks” and to “invest in the future.” Blackrock’s strategists recommend an overweight position in US stocks and an underweight position in Europe. They point out that the US has outperformed the global stock market since 2010 and predict that this trend will continue. American companies are considered to be best positioned to benefit from the “AI mega-force,” which could boost profits for a growing number of companies in the future.
The strategists also see potential for the tax cuts and deregulation promised by Donald Trump to create a stock market boom in the US. However, they also caution that the incoming president could cause chaos. Two signals that could prompt Blackrock to reconsider its positive stock market outlook are if long-term interest rates spike or if a global trade war breaks out.
Regarding Europe, the fund company justifies its underweight position by pointing out that the region is facing structural challenges, low growth, and political unrest.
### Belief in Bitcoin
Blackrock also highlights the importance of diversification as geopolitical tensions, particularly between the US and China, are expected to increase in 2025.
“Geopolitical risks are structurally elevated, and a range of shocks loom over the global economy,” says Tom Donilon, chairman of Blackrock Investment, in the report.
According to the company’s strategists, government bonds have become increasingly unreliable as a diversification against stocks. Instead, they advocate for bitcoin, which is said to have store-of-value properties and, at the same time, significant upside potential if the cryptocurrency begins to be widely used as a means of payment.