Blackrock sees an uptick in global growth as illustrated by its Macro GPS economic indicator, which includes a combination of economic and big data signals, Boa said in a media briefing last week.
“The gap between our indicator and consensus has existed for sometime,” she said, noting that the consensus is bearish. The firm expects a global recovery, which is a significant change from the last few years.
The reflationary environment, which includes both nominal growth and inflation, is also positive for equities.
Boa noted that reflation is not a post-US election theme but has been holding since the summer of this year. In addition, although it is largely driven by the US, it is not just a US story.
This has been assisted by the stabilisation of both China and trade, she said.
The transition from fiscal to monetary policy is also good for the equities markets. According to Boa, monetary policies and their effects and implications on a low-yield environment are now challenged.
“This creates a limit to how much monetary policy can be affective.”
Although the transition to fiscal policy may be positive, there exists a huge uncertainty in terms of its impact on growth estimates, she noted.
Asia and EM are winners
Asia and emerging markets are relative winners from the current macro backdrop, according to Jonathan Reoch, Blackrock’s lead product strategist for Asian equities, who also spoke at the briefing.
“These tailwinds in growth offset some of the US rate pressures and some of the foreign exchange pressures going forward,” he said.
The firm is already seeing the first signs of a positive turnaround in earnings revisions in Asia ex-Japan, which were negative for the last five years, according to Reoch.
One of the firm’s overweights is China. “China is beginning to have a more renewed path in terms of reform,” Reoch said, adding that he likes some of the both old and new economy stocks.
India and Indonesia, which were part of the “fragile five” three years ago, are now the firm’s favourites, given their domestic growth drivers and adjustments in their current and fiscal accounts, according to Reoch.
“There is really no surprise that they are the better performers… and we like the spread of investments that we get from value stocks,” he said.
The firm has also moved from a neutral to a tactical position in Japan.
“Japan is significantly leveraged to the global upturn. You could see that in the earnings forecasts now, as we have a weaker yen,” Reoch said.
Some of the policy moves and the political stability in Japan is widely underappreciated by foreign investors, he added.
