BlackRock Cuts U.S. Stocks to Neutral, Turns Bullish on Treasuries for First Time in Six Years
BlackRock turns bullish on Treasuries for the first time in six years
BlackRock's Investment Institute has downgraded U.S. equities to neutral from a long-held overweight and upgraded short-term Treasuries to overweight, ending an underweight stance on U.S. government debt held for most of the past six years.
In the same note, the institute raised longer-term Treasuries to neutral from underweight, cut U.S. agency mortgage-backed securities to neutral, and trimmed its underweight in Japanese government bonds. The views were set out by strategists Jean Boivin and Wei Li together with Rick Rieder, BlackRock's chief investment officer of global fixed income.
Yields did the persuading
BlackRock first went underweight Treasuries in October 2020, when the 10-year yield sat near 0.9%. The benchmark yield has since surged above 5.2%, its highest level in more than two decades, as stronger growth, heavy capital demand and renewed inflation concerns tied to oil prices and Middle East tensions pushed rates up.
"Now, yields have reset toward our long-held higher-rates view, and we want to lock in some attractive income," the team wrote. BlackRock argued that market expectations for Federal Reserve tightening have gone too far: interest-rate swaps currently price at least three quarter-point hikes over the next 12 months, and the firm sees short-term Treasuries, which carry roughly a 75 basis point cushion against further yield rises, as the place to be if those bets unwind.
The equity downgrade funds the shift. BlackRock cited potential volatility around the AI buildout and described the move as tactical risk management, while keeping its conviction in AI-related companies. It is not alone: PIMCO's Rupert Harrison said last week that the firm's bond portfolio is about as long in duration as it has been for a very long time.
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How this could hit the options market
When the world's largest asset manager rotates from stocks into bonds, positioning follows. Traders will watch flow in Treasury ETFs like TLT, IEF and SHY for signs that institutional duration buying is building, and in SPY and QQQ for defensive put demand if the neutral call spreads.
The call also raises the stakes on every inflation print and Fed speaker. If hike expectations priced into swaps start to unwind, long-dated yields can fall fast, which is rocket fuel for rate-sensitive growth names. BLK itself is in focus as investors judge whether the house view helps or hurts its flows story.
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