BlackRock Sees ‘Rip Van Winkle’ Risks as Globalization Unwinds

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BlackRock Inc. strategists warned that decades of globalization will erode due to the coronavirus pandemic, leaving investors emerging from lockdowns to face new risks.

After more than 25 years of integrating global supply chains and financial markets, “this is a moment of real pause or transformation,” Mike Pyle, global chief investment strategist of the BlackRock Investment Institute, said Monday in a virtual press briefing.

“The sort of Rip Van Winkle character of this moment is most pronounced,” Pyle said, referring to the story of a man who sleeps for 20 years and awakes to find a different world. “We’re all out of our normal lives, all working from home, in the face of this very significant global event.”

The pandemic is exacerbating tensions between the U.S. and China, and forcing companies to reassess supply chains and how they do business around the world. Pyle said investors will need to rethink how they construct their portfolios as a result, carefully considering which geographic locations will be engines of growth.

Inflation will be another major risk stemming from de-globalization, according to Elga Bartsch, head of macro research at the BlackRock Investment Institute. “Globalization was a major factor in keeping inflation low,” Bartsch said.

Among the other views:

  • The strategists downgraded U.S. equities to neutral, citing risks of the pandemic dragging on, tension with China and a divisive election year
  • They turned neutral on Asia fixed-income, also due to renewed tensions between the U.S. and China
  • Read more: BlackRock Upgrades European Stocks to OW; Cuts U.S. to Neutral

©2020 Bloomberg L.P.

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