AI Boom to Fuel US Stocks and Economic Growth in 2025
The future of artificial intelligence (AI) is looking bright, and BlackRock, the world’s largest asset manager, expects this trend to continue boosting US stocks and supporting economic growth in 2025. According to the BlackRock Investment Institute, innovations in AI technology will have a more significant impact on US stocks compared to their European counterparts.
US Stocks Set to Outperform
The institute’s 2025 outlook report, based on the views of senior portfolio managers and investment executives, suggests that the AI theme will broaden out, making US stocks a more attractive investment opportunity. As a result, BlackRock is going further overweight on US stocks, expecting them to outperform their European peers.
Economic Growth and Interest Rates
While US economic growth may slow down slightly in 2025, the Federal Reserve is unlikely to lower interest rates significantly due to sticky inflation above its target. The institute expects interest rates to remain between 4% and 4.75%, which could put upward pressure on long-term Treasury yields.
Risks and Challenges
However, rising US government debt levels pose a significant threat to BlackRock’s upbeat forecasts. Investors may demand higher compensation to hold long-term government debt, leading to increased yields and decreased prices. This could have a negative impact on the bond market.
Alternative Investment Opportunities
In response to these challenges, BlackRock is favoring US corporate debt over Treasuries, as well as government bonds in other developed markets such as the United Kingdom. The institute also sees value in sectors like tech and healthcare, and assets like gold and bitcoin as alternatives to government bonds.
Private Markets and Infrastructure
Private markets are expected to play a crucial role in financing AI-related infrastructure, offering exposure to early-stage growth companies and vital infrastructure projects. BlackRock prefers infrastructure equity due to attractive relative valuations and mega forces, and direct lending for income generation.
Strategic Outlook
In summary, BlackRock’s 2025 outlook is bullish on US stocks, driven by the AI boom, and cautious on long-term US Treasuries due to rising government debt levels. The institute’s strategic approach favors private markets, infrastructure equity, and direct lending, providing investors with alternative opportunities for growth and income generation.
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