By Laura Sánchez
Investing.com - For decades, Warren Buffett has maintained a fairly conservative approach to investing, favouring retail and banking actions, while giving a wider range to more volatile sectors such as technology and energy.
Says Tony DeSpirito, chief investment officer of BlackRock's (NYSE:BLK) fundamental equity division, in a presentation on the fund's outlook for the second quarter of this year, picked up by MarketWatch.
DeSpirito notes that we are about to witness not only a "new world order" that "will undoubtedly involve higher inflation and interest rates than we had between 2008 and 2020", but a more challenging environment for investors, particularly as Russia's war in Ukraine threatens to keep energy and commodity costs in the spotlight.
According to DeSpirito, this new scenario "could favour US stocks, as they are more protected than European stocks against increases in energy prices and the direct impacts of the war and its economic ramifications".
As for bonds, this expert notes that "this sector, which generally benefits from an edge in times of risk aversion, provides less portfolio drag today as correlations with equities have converged".
The team also expects 10-year Treasury yields to rise as the Fed looks to raise its key rate, but that "it would have to get to 3% or 3.5% before we question the risk/reward for equities," DeSpirito notes.
Moreover, the manager expects inflation to fall from current highs by the end of this year, and sees it likely to settle above the 2% level (as before the pandemic), or perhaps in the 3% to 4% range in the worst case scenario.
At the corporate level, DeSpirito sees potential for an opportunity for companies. "The period of extremely low interest rates was very good for growth stocks and very challenging for value investors," he says. "It is likely to be different from now on, restoring some of the attractiveness of a value strategy," he concludes.
This is not the first time BlackRock has warned about the current market situation and the changes ahead. Recently, in a note to shareholders, it noted that Russia's invasion of Ukraine would put an end to globalisation.