BlackRock is pushing deeper into U.S. stocks, raising its overweight to 3% across its $185 billion model‑portfolio platform, even while investors argue about whether the AI rally still has legs.
According to an investment outlook shared on Wednesday, BlackRock already increased risk back in September, but this latest move lands at a tense moment. AI names look stretched, and traders are losing hope that the Federal Reserve will cut rates as fast as they once expected.
The S&P 500’s six‑month run has cooled this month, but BlackRock said in its letter that earnings remain strong and inflation is slowing, which should keep the Fed on track to cut. Nvidia’s results tonight will test that whole idea.
The company’s quarterly numbers will show whether chips can still carry the story or whether investors should prepare for impact.
BlackRock shifts model flows and tilts factors
Michael Gates, who runs BlackRock’s Target Allocation ETF model portfolios, said the backdrop still supports taking risk.
Gates wrote, “A strong recent earnings season, an easing Fed, and a generally friendlier liquidity backdrop make the case for staying constructively tilted toward risk.” That view came as model portfolios continue to grow fast.
Assets in BlackRock’s model platform climbed from $150 billion earlier this year to $185 billion now. Because of that size, even small adjustments create huge inflows and outflows across its products.
The firm is also changing how its factors line up inside those model portfolios. It is shifting toward value and momentum and reducing growth. The tilt sparked one of the biggest single‑day exits ever for a factor fund.
About $4.2 billion left the iShares MSCI USA Quality Factor ETF (QUAL) in the latest session. At the same time, roughly $3.2 billion moved into the iShares S&P 500 Value ETF (IVE), and another $1.3 billion flowed into the iShares MSCI USA Momentum Factor ETF (MTUM).
Gates wrote, “Market leadership has continued to rotate, with momentum strategies capturing recent trends and value exposures providing important balance. While growth remains a vital theme, we are deliberately reducing some overweight to growth by adding to value, and pivoting from quality to momentum.” The message was blunt: growth is still relevant, but BlackRock is dialing it down.
The changes didn’t stop at equities. BlackRock’s model portfolios also altered their fixed‑income side. The firm added the iShares Systematic Bond ETF (SYSB).
That alone sent $175 million into the fund during the most recent session, which more than doubled its assets. Gates said bond pricing is tight, writing, “Bond valuations remain stretched, with spreads near historical tights and limited compensation for credit risk.”
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