BlackRock emphasizes the importance of selectivity in investment strategies as trade frictions impose a slowdown on global growth. Despite this, long-term trends in AI and fiscal stimulus present distinct opportunities.

Predictions on Supply-Side Contraction

• GDP Forecast: A supply-driven slowdown in the U.S. as firms face higher costs and disrupted supply chains.
• Earnings Revisions: S&P 500 EPS growth rates revised down from 14% to 8.5%.

The Tariff and Inflation Interplay

• Heightened Inflation Risk: Tariffs often impact consumer pricing.
• Fed Constraints: Tariff-induced price pressures may limit monetary easing, affecting equity valuations.

Monitoring Earnings as an Indicator

BlackRock notes that many companies are discussing relocating production to more stable regions, with potential impacts on earnings. This could lead to significant adjustments in net EPS as firms adapt.

Identifying Market Resilience

• Tech Sector Performance: Major tech firms have shown strong earnings growth.
• European Stability: Defense and infrastructure spending bolster certain sectors.

Strategic Recommendations

1. Maintain Focus on Developed Market Equities: Concentrate on firms with resilient supply chains.
2. Monitor Earnings Calls: Pay attention to management’s remarks regarding tariffs.
3. Watch Inflation Trends: Understand the implications of tariff-related price shifts.

By staying updated on market dynamics, investors can better navigate these ongoing changes.