BlackRock bullish on UK stocks after elections, Japan stocks are top play

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NEW YORK/LONDON, July 9 (Reuters) – The BlackRock Investment Institute (BII) said on Tuesday that recent parliamentary elections in Britain had made valuation of UK equities attractive, while Japan stocks remained its favoured equity investment play.

The British Conservative Party suffered a historic election defeat last week with a record number of cabinet ministers losing their seats.

“Valuation is very compelling … and given the perceived political stability leading to better sentiment, we think there’s a tactical opportunity for UK equities,” Wei Li, global chief investment strategist at BlackRock, said on Tuesday.

BII, an arm of U.S.-based investment firm BlackRock that provides proprietary investment research, said in a mid-year outlook report that the prospect of higher-for-longer interest rates made inflation-linked bonds attractive. On a country level, Mexico and India should “benefit from rewiring supply chains in the long term,” BII added.

BII is bullish on U.S. stocks and artificial intelligence, the report said.

“(Japanese equities are) our highest conviction equity view thanks to support from the return of mild inflation, shareholder-friendly corporate reforms and a Bank of Japan that is cautiously normalizing policy, rather than tightening,” it said.

With regards to U.S. government debt ahead of the presidential election, long-term debt prices are not sufficiently reflective of the prospect of widening U.S. fiscal deficits, prompting BlackRock’s preference for short- to medium-dated Treasuries, said Li.

Both U.S. presidential election front-runners, President Joe Biden and former President Donald Trump, are not prioritising a reduction in government spending, which could lead to wider term premiums, she said, referring to the compensation investors require for holding long-term debt.

“Both of these candidates are not really talking about plans that bring down fiscal deficits. They spend in different ways but they’re both looking to spend,” she said.

“We prefer the front end of the curve, the belly of the curve, over the long end … because the U.S. term premium in particular does not reflect that fiscal trajectory,” she added.

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Edmund Shing, PhD

Global Chief Investment Officer
BNP Paribas Wealth Management

Edmund has over 29 years of experience in financial markets in a wide variety of positions, ranging from proprietary trading to portfolio manager in a number of financial institutions in London and Paris.  He previously held the role of Global Head of Equity and Derivative Strategy at BNP Paribas in London from 2015 to 2020, and has been Chief Investment Officer at BNP Paribas Wealth Management since November 2020.

Edmund is responsible for piloting our investment strategy and will continues to rollout out recommendations and themes with actionable advice that brings our expertise to our clients and support to our client-facing teams.  In this time of change, his expertise in following and anticipating markets is a true value added for both our customers and those at Wealth Management who serve them.

Edmund has a PhD in Cognitive and Computing Science from the University of Birmingham in the United Kingdom, and has done advanced studies in Knowledge-Based Systems and in Experimental Psychology.  He is an EFFAS-certified financial analyst. He has also authored the book “The Idle Investor” published by Harriman House in 2015, proposing 3 simple investment strategies that take only a few minutes to execute per month.

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