Market take
Weekly video_20260914
Michel Dilmanian
Portfolio Strategist
BlackRock Investment Institute
SCRIPT
Header:
CAPITAL AT RISK. MARKETING MATERIAL.
Opening frame: What’s driving markets? Market take
Camera frame
Title slide: EM equities: back to overweight
Higher interest rates don’t automatically mean trouble for stocks. The key question is: why are yields rising? If they’re moving up because investment and growth are accelerating, stronger earnings can help outweigh the impact of higher borrowing costs. That nuance helps explain our pro-risk stance.
1: Back to overweight EM stocks
So, why did our views on EM stocks change? Earnings durability is a key measure as interest rates reset higher. EM equities stand out by this measure.
Earnings growth has accelerated, while valuations remain well below those in the U.S. We stepped back to neutral in June as leverage concerns, especially in Korea, were building. Since then, deleveraging has eased those concerns, supporting our move back to overweight.
2: The AI scarcity play
EM equities offer another way to express one of our highest conviction investment themes: AI scarcity. South Korea and Taiwan are key players in the semiconductor, memory and hardware supply chains powering the AI buildout. Meanwhile, Latin America offers exposure to other scarce resources and physical infrastructure supporting the AI buildout.
All of these are different expressions of the AI scarcity theme that underpins our U.S. equity overweight.
3: Staying sharp
We stay pro-risk, but nimble. Our return to overweight in EM equities comes alongside our downgrade of short-term European government bonds. More broadly, we’re sticking with our overweights in U.S. equities and AI.
We’re also keeping a close eye on the key assumptions behind those views. If AI earnings disappoint, leverage concerns grow, or higher long-term rates create a bigger hurdle for stocks, we’d reassess. As always, we’re ready to adjust as conditions change.
Outro: Here’s our Market take
We remain pro-risk as strong fundamentals help offset the impact of higher interest rates. But this isn’t an all-clear signal, and we’ll adjust our views if the data points us in a different direction.
Closing frame: Read details: blackrock.com/weekly-commentary
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