BlackRock Upgrades Developed-Market Stocks, Cuts High Yield on 2026-27 AI Earnings Strength
Updated
Updated · The Globe and Mail · May 29
BlackRock Upgrades Developed-Market Stocks, Cuts High Yield on 2026-27 AI Earnings Strength
3 articles · Updated · The Globe and Mail · May 29
BlackRock shifted its strategic portfolios to overweight developed-market equities and downgraded high-yield credit to neutral, saying it would rather take growth risk through stocks than coupon income.
Top-five earnings upgrades since 1988 for MSCI U.S. 2026 and 2027 forecasts drove the move, while the expected 2027 growth gap between the Magnificent Seven and the rest of the S&P 500 narrowed to 3 points from 31% in 2024.
The firm said AI leadership is spreading across sectors and regions, favoring developed-market tech, health care and energy, while keeping an overweight on emerging-market equities tied to AI supply chains such as Taiwan and South Korea.
To fund the equity upgrade, BlackRock also cut developed-market government bonds to underweight and kept inflation-linked bonds overweight, arguing inflation will stay more persistent over a five-year-plus horizon.
BlackRock framed the changes as a scenario-based response to competing mega forces: an AI-led productivity boom that supports valuations versus geopolitical fragmentation that could lift risk premia and pressure equities.
With bonds no longer a safe bet, how should investors navigate a world of AI disruption and rising inflation?
AI is booming, but global conflict is rising. Which powerful trend will ultimately control the market's direction?
BlackRock Bets Big on AI: 2026 Asset Allocation Overhaul Favors Developed Equities, Warns on Bonds
Overview
BlackRock has made a major shift in its investment strategy, driven by the accelerating and widespread impact of artificial intelligence on corporate earnings. Recognizing AI as an operating reality and a key mega force, BlackRock upgraded developed-market equities to overweight and downgraded high yield bonds to neutral. The firm sees the buildout of AI infrastructure as a powerful driver of investment demand across many sectors, with AI's benefits now spreading beyond just technology giants. This broadening adoption of AI is prompting BlackRock to rethink traditional portfolio construction, focusing on sectors and regions best positioned to benefit from this transformation.