Stocks Trade Higher Following Record Closes, BlackRock’s Wei Li Discusses Market Drivers
US stocks are trading higher following a strong performance in February, which saw record closes for major indices. BlackRock’s Global Chief Investment Strategist, Wei Li, joined Yahoo Finance Live to discuss the market drivers behind this upward trend.
Repricing on Rates and Strong Returns
Li highlights that markets have “significantly repriced” based on rates, indicating a persistent “stickiness.” Despite this, risk assets continue to deliver “strong returns” due to robust earnings results. Fourth-quarter earnings have exceeded expectations, with gains from tech mega-caps playing a significant role in this success.
Neutral Stance on Broader Markets
While acknowledging the positive performance of risk assets, Li remains neutral on broader markets due to elevated valuations that surpass pre-pandemic levels. As interest rates rise, Li explains that multiples should decrease; however, they have expanded instead. This discrepancy raises questions about the sustainability of current valuations unless there is widespread economic productivity beyond artificial intelligence (AI).
The Role of AI and Tech Sector
Li emphasizes the importance of AI in driving economic productivity and its potential to boost the broader economy. While it is still early days for AI’s impact, BlackRock maintains an overall overweight position on US equities, particularly in the tech sector. This conviction stems from the belief that AI and tech companies will continue to contribute significantly to market growth.
Conclusion
The US stock market has seen a positive start to the new trading month, building on the momentum from February’s record closes. BlackRock’s Wei Li highlights the significant repricing based on rates and the strong returns driven by robust earnings results. However, Li maintains a neutral stance on broader markets due to elevated valuations that have expanded despite rising interest rates. The role of AI in driving economic productivity is crucial, and BlackRock remains overweight on US equities, particularly in the tech sector, as they believe in the long-term potential of AI-driven growth.
