BlackRock Investment Institute has ended its long-held overweight call on U.S. stocks, moving equities to neutral. It also made its first overweight call on short-term U.S. Treasuries in abou
BlackRock Investment Institute has ended its long-held overweight call on U.S. stocks, moving equities to neutral. It also made its first overweight call on short-term U.S. Treasuries in about six years, after holding an underweight for most of that period.
The shift comes as 10- and 30-year Treasury yields hit 24-year highs, giving investors more income from government bonds as BlackRock looks to manage volatility around the enormous buildout in artificial intelligence (AI) across the markets.
The world’s largest asset manager, however, isn't turning bearish on AI.
“We are managing near-term risk, not changing our core convictions,” BlackRock Investment Institute said in an Oct. 12 commentary.
The firm, which oversaw a record $15.3 trillion in assets under management by the end of H2 2026, said it still prefers AI and technology within U.S. equities and is prepared to add risk again if visibility improves.
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BlackRock first moved underweight long-duration Treasuries in October 2020, when the 10-year yield was below 0.9%.
The present 10-year yield generated by Treasuries stands at around 5.25%, after recently reaching 24-year highs.
Middle East tensions and higher oil prices have also pushed inflation concerns back into focus. Since January, markets have priced in the Federal Reserve raising interest rates by another 1.60% over the next 12 months, BlackRock said.
It believes the move is rather excessive.
That repricing has changed the relative appeal of bonds and stocks. Higher yields now offer investors meaningful income at the same time markets are questioning how long the AI spending boom can continue.
The five largest hyperscalers are set to spend more than $1 trillion on AI-related capital expenditure from 2025 through 2026, as per the estimates shared by The Bank for International Settlements (BIS) in June. It also warned that spending is outpacing free cash flow at some firms, increasing reliance on debt.
UBS also remains optimistic, forecasting $820 billion of AI capex in 2026 and $990 billion in 2027. It also noted that semiconductor stocks are trading around 26 times forward earnings, far below roughly 150 times during the dot-com peak.
The IMF had added to these concerns on Oct. 13. The international financial body has essentially issued a warning that an AI-related market correction could threaten global financial stability if investment or profit expectations disappoint.
BlackRock says crypto could power AI commerce (1:41)BlackRock upgraded short-term Treasuries to overweight and longer-dated Treasuries to neutral. It trimmed its underweight on Japanese government bonds and moved U.S. agency mortgage-backed securities to neutral.
The firm said the short end offers the best risk-reward if aggressive Fed tightening expectations unwind with current yields providing roughly a 0.75% cushion before the 12-month returns turn negative.
BlackRock's U.S. equity downgrade is therefore more about taking profits and managing near-term AI volatility than entirely abandoning the theme.
Investors will now watch metrics like the U.S. CPI and PPI data alongside the Fed pricing and hyperscaler spending guidance to assess if BlackRock’s new positioning needs a revision.
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