The market’s wobbling. Here are BlackRock’s shields for the biggest risks.
The stock market is starting to wobble. After Tuesday’s 1.1% decline, the post-election gains in the S&P 500 SPX are down to just 2%, according to Dow Jones Market Data.
The latest economic data show falling hiring and quitting rates and a surge in perceived price rises from service-sector purchasing managers. President-elect Donald Trump’s news conference, in turn, did nothing to change the perception that his leadership will be at the very least unpredictable for the next four years.
Like many investment firms, asset-management giant BlackRock has been saying for awhile now that U.S. stocks will continue to do well in 2025, despite the uncertainty.
But maybe of more use are the hedges the company with $11 trillion in assets has articulated for a number of concerns that are currently weighing on investors’ minds, according to strategists led by Gargi Chaudhuri, the firm’s chief investment and portfolio strategist for the Americas.
For example, if the U.S. economy grows more slowly than expected, equity market neutral funds that have short as well as long positions could offset that impact, as the firm specifically named BlackRock Global Equity Market Neutral Fund BDMIX, BlackRock Tactical Opportunities Fund PBAIX and the BlackRock Systematic Multi-Strategy Fund BIMBX. (A rival offering is the Vanguard Market Neutral Fund VMNFX.)
If wage inflation continues — perhaps due to Trump trying to slow immigration — the firm recommends iShares 0-5 Year TIPS Bond ETF STIP and the iShares Advantage Large Cap Income ETF BALI, though they say allocations to high-growth U.S. technology firms also could hedge inflation if declining immigration is met with greater automation. (The Vanguard Short-Term Inflation-Protected Securities Index Fund VTIP and the Schwab U.S. TIPs ETF SCHP would be non-BlackRock alternatives for a inflation-protected bond fund.)
For a shield against import tariffs, the iShares U.S. Aerospace & Defense fund ITA has a high correlation with the trade policy uncertainty index since 2006, meaning it rallies during times of rising trade uncertainty. Or one could look to the iShares Manufacturing ETF MADE for companies that should benefit from protection against foreign competitors.
For rising fiscal deficits, the firm says bitcoin and gold can benefit. “Scarcity serves as a key component of value creation in a world of possible currency debasement,” their strategists say.
But maybe an investor would just like protection regardless of the source of the risk. There, BlackRock identifies buffer funds – they recommend the iShares Large Cap Moderate Buffer ETF IVVM and the iShares Large Cap Deep Buffer ETFIVVB, and rival buffer ETFs include the FT Vest Laddered Deep Buffer ETF BUFD and the Innovator U.S. Equity Power Buffer ETF PFEB.
Buffer ETFs give up upside potential to provide more downside protection. Those products probably don’t make sense for a long-term investor and are easily front run, according to options experts, but may make sense in the short term for those who don’t want to wade into the options market directly.
The market
U.S. stock index futures ES00 NQ00, gyrating through the morning, were recently flat as bond yields BX:TMUBMUSD10Ycontinued to waver. Oil CL00 was trading around $75 per barrel. U.K. bond yields BX:TMBMKGB-10Y continue to spike.
|
Key asset performance |
Last |
5d |
1m |
YTD |
1y |
|
S&P 500 |
5909.03 |
0.47% |
-2.09% |
0.47% |
24.23% |
|
Nasdaq Composite |
19,489.68 |
0.93% |
-1.00% |
0.93% |
31.18% |
|
10-year Treasury |
4.692 |
11.60 |
41.70 |
11.60 |
65.80 |
|
Gold |
2666.1 |
1.02% |
-3.18% |
1.02% |
31.35% |
|
Oil |
74.38 |
3.49% |
5.68% |
3.49% |
4.29% |
|
Data: MarketWatch. Treasury yields change expressed in basis points |
|||||
The buzz
A raging wildfire burned homes in the Los Angeles area, impacting stars like James Woods and Steve Guttenberg.
Ahead of Thursday’s observance of President Jimmy Carter’s funeral, the U.S. economics calendar includes the December ADP private-sector employment report, which showed a slowdown to 122,000 jobs created, and weekly jobless claims, which tumbled 10,000 to 201,000 .
Fed Gov. Christopher Waller said he backs more interest-rate cuts this year ahead of the release of minutes from the Dec. meeting at 2 p.m.
There’s also a $22 billion auction of 30-year notes.
CNN reported that Trump may use emergency powers to allow for a new tariff program.
Quantum computing plays including Rigetti RGTI and IonQ IONQ fell after Nvidia NVDA CEO Jensen Huang said that the timeline for useful quantum computers is 15 to 30 years away.
FanDuel owner Flutter Entertainment FLUT cut its revenue outlook because too many NFL favorites won in November and December .
Novo Nordisk NVO expanded an AI drug discovery deal that may cost it as much as $4.6 billion.
Instacart operator Maplebear CART is entering the S&P MidCap 400 as Enovis ENVX gets downgraded to the S&P MidCap 600, where a spot is opening due to Consol Energy buying Arch Resources ARCH.
Best of the web
Xi Jinping muzzles China economist who dared to doubt GDP numbers.
Active mutual funds struggle to beat large-cap stock benchmarks — again.
JPMorgan is planning to bring staff to the office five days a week.
Top tickers
Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.
|
Ticker |
Security name |
|
NVDA |
Nvidia |
|
TSLA |
Tesla |
|
GME |
GameStop |
|
PLTR |
Palantir Technologies |
|
RGTI |
Rigetti Computing |
|
FUBO |
fuboTV |
|
AMD |
Advanced Micro Devices |
|
TSM |
Taiwan Semiconductor Manufacturing |
|
MSTR |
MicroStrategy |
|
AAPL |
Apple |
The chart
Now that the 10-year yield has firmly breached the 4.5% level, the market is shifting to a ‘good news is bad news’ environment again, according to Bank of America strategists led by Ohsung Kwon . Over the past two years, the correlation between the S&P 500 and the 10-year yield has closely tracked the direction of the 10-year, they say, and the 4% to 4.25% range has been the level where correlations flipped.
Random reads
Another Elon Musk mystery – how he found the time to master the videogame Diablo.
This Tokyo apartment goes for a mere $222 per month. It’s been compared to a giant toilet.
This lost dog got tracked down thanks to a thermal drone.
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