BlackRock: Overweight on US and Japanese stocks, optimistic about the European financial sector

According to the Zhitong Finance APP, BlackRock holds an overweight view on U.S. stocks and Japanese stocks, and sees continued corporate earnings growth in both markets. Although earnings performance in other regions of the world is relatively weak, detailed analysis and granular alignment can still capture investment opportunities, such as European bank stocks. Relevant data shows that about half of the industries in Europe are experiencing a continuous decline in earnings. However, BlackRock is optimistic about the European financial sector, as high interest rates have led to strong earnings performance for banks.

At the beginning of 2024, BlackRock is optimistic about U.S. stocks and Japanese stocks, as it expects their earnings growth to be the strongest, and this has indeed been the case. As shown in the chart below, over the past 12 months, U.S. companies achieved a 9% earnings growth, compared to just 1% for other global markets. The rapid rise of U.S. stocks is driven by AI-related investment themes and the resilience shown by the U.S. economy. The earnings growth of the seven major tech giants in the U.S. reached 45% over the past year. At the same time, benefiting from shareholder-friendly corporate reforms and the return of inflation, companies' pricing power has improved, leading to a 14% earnings growth for Japanese companies. The market generally expects that, although corporate earnings are improving globally, the U.S. will maintain its leading advantage. BlackRock believes that the varied performance of corporate earnings indicates that we are not in a typical business cycle, and it highlights the importance of focusing on AI themes and conducting detailed analysis.

BlackRock's Think Tank believes

Will corporate earnings reach the market's high expectations in 2025? Although market forecasts are often revised downwards, BlackRock expects corporate earnings outside the U.S. to achieve broad growth from a lower base, while still maintaining its viewpoint. In the U.S., the seven major tech giants are expected to continue driving overall corporate earnings growth due to the disruptive trend of AI. However, as inflation eases, consumer spending grows steadily, and expectations for regulatory easing rise, this may promote the development of non-tech industries, thereby narrowing the leading advantage of these tech giants. With the advancement of AI construction, public utilities, industrial, energy, and real estate companies that provide key AI inputs hold investment opportunities and have profit growth potential. Given that the U.S. will lower corporate tax rates and ease regulations, BlackRock believes the market may continue to favor risk assets, thus maintaining an overweight view on U.S. stocks.

Japan is another highlight. Over the past year, the overall earnings growth of Japanese companies has even surpassed that of the U.S. The macroeconomic outlook for Japan is more positive, due to the return of inflation and the implementation of shareholder-friendly corporate reforms, leading to an optimistic market sentiment. Given that Japan's inflation is currently only moderately returning, there is no need to overly worry about the rise in core inflation in November. BlackRock believes that although the recent appreciation of the yen from its low point may impact corporate earnings, the strong domestic market outlook in Japan can continue to drive corporate earnings growth. At the same time, Japan's domestic economic recovery can mitigate the impact of threats such as the rise of U.S. protectionism Therefore, BlackRock maintains an overweight view on Japanese stocks.

For regions with more challenging market prospects, aligning granularity and adopting refined investment analysis is key. Europe is still struggling to cope with challenges, with the third quarter marking only the second consecutive quarter of profit growth. At the same time, BlackRock is optimistic about the utilities sector, as it is one of the few sectors outside the U.S. that benefits from the development of artificial intelligence. In the UK, due to attractive valuations and the stability brought by the Labour Party's overwhelming victory in the UK elections earlier this year, BlackRock tactically held an overweight view on UK stocks. However, investors have not rekindled their interest in investing in the UK as BlackRock had expected, and the profit levels of UK companies are contracting