For the first time in six years, BlackRock, the world's largest asset manager, has reversed its bond outlook: increasing its allocation to US Treasuries.
2026-10-13 19:46:18
BlackRock, the world's largest asset manager, released its latest asset allocation outlook, ending a six-year underweight stance on US Treasuries. It upgraded short-term US Treasuries to overweight and long-term bonds to neutral, while downgrading US equities from overweight to neutral. This rebalancing is not a complete bearish view on US equities, but rather a tactical asset rebalancing. The core logic is that current US Treasury yields have climbed to a 20-year high, providing bonds with a substantial yield and safety cushion to hedge against stock market volatility caused by the AI boom. With earnings season officially underway, the technology sector is under pressure, leading to significant changes in the asset allocation landscape. 
The US stock market bull run has entered a new phase, with tech stocks remaining the core driver but volatility increasing. The S&P 500's bull market has entered its fourth year, with tech stocks consistently being the primary driver of this rally. The index rebounded from its April lows, recording a 14% gain for the year, but most of the gains were concentrated in the spring. From June to Monday's close at 7807 points, the S&P 500 only rose slightly by about 2.6%, entering a consolidation phase. Market sentiment is undergoing subtle shifts. This Tuesday, the US earnings season kicked off, and while the market was initially focused on the performance of large banks, the tech sector stole the spotlight. A sharp decline in South Korean chip stocks triggered expectations of continued selling pressure on US tech stocks. Meanwhile, the entire US Treasury yield curve remains at a 20-year high, and the continuously rising interest rates are beginning to put downward pressure on equity asset valuations. A six-year policy shift: Rising US Treasury yields prompt BlackRock to restart bond allocations. BlackRock Investment Institute announced this landmark adjustment in a client report. For the past six years, underweighting US Treasuries has been a core principle of BlackRock's fixed income allocation. However, the current environment has changed: rising yields coupled with excessive market expectations of Fed rate hikes have created conditions for unwinding the underweight position in US Treasuries. The institution has upgraded short-term US Treasuries to overweight and long-term Treasuries to neutral. The core reason is that the current higher yields better compensate for the interest rate risk associated with holding bonds. Data comparisons are highly relevant: when BlackRock first underweighted US Treasuries in October 2020, the 10-year Treasury yield was only around 0.9%, while it has now reached 5.192%; the 2-year Treasury yield has risen from 0.16% that year to 4.778%, a level last seen since 2007. BlackRock's calculations show that bond investors can now obtain inflation-adjusted real returns rarely seen in decades. With ample asset safety buffers, yields need to rise another 75 basis points before bond investment returns turn negative. Source of Funds for Portfolio Adjustment: US Equities Shifted from Overweight to Neutral to Manage AI Market Volatility Funds used to increase holdings of US Treasuries partly came from closing long-term overweight positions in US equities, resulting in a downgrade of US equities to neutral. BlackRock emphasized that this is short-term risk management, not a reversal of its long-term core judgment; the fundamental logic of AI transformation remains valid. The firm explained that a high-interest-rate environment will accelerate corporate differentiation, and only companies capable of generating returns higher than the cost of capital will consistently outperform the market. While reducing its overall US equity position, BlackRock remains optimistic about AI supply chain companies and listed infrastructure assets. The scarcity of critical infrastructure supply and continued demand expansion can sustain strong returns, and the value of existing infrastructure assets is expected to continue to rise in a scarce environment. Even if the AI narrative experiences periodic fluctuations, BlackRock still believes that fundamentals will ultimately dominate the market. FactSet's analyst forecasts predict that S&P 500 earnings are expected to grow by 30% year-over-year in the third quarter. A spokesperson for BlackRock Investment Institute mentioned that the rating for US stocks has switched between overweight and neutral multiple times in recent years. It was downgraded to neutral in March of this year, then reverted to overweight in April, and this latest adjustment represents another tactical shift. The core disagreement behind this is a discrepancy between market expectations of interest rate hikes and BlackRock's assessment . The key contradiction in asset pricing centers on the future path of the Federal Reserve's interest rate hikes. Market pricing indicates that investors expect the Fed to raise interest rates by a cumulative 160 basis points over the next 12 months, but BlackRock believes this expectation is overpriced. Since September, the average term premium for long-term Treasury bonds has been approximately 75 basis points. The term premium represents the additional compensation investors require to hold long-term bonds; this increase means that US Treasuries currently offer a more attractive entry window. This is also the underlying macroeconomic logic of BlackRock's asset rebalancing: in a high-interest-rate environment, bonds are no longer low-yield sidelines but have become an important option in the portfolio for hedging against equity volatility and locking in stable cash flow.
The US stock market bull run has entered a new phase, with tech stocks remaining the core driver but volatility increasing. The S&P 500's bull market has entered its fourth year, with tech stocks consistently being the primary driver of this rally. The index rebounded from its April lows, recording a 14% gain for the year, but most of the gains were concentrated in the spring. From June to Monday's close at 7807 points, the S&P 500 only rose slightly by about 2.6%, entering a consolidation phase. Market sentiment is undergoing subtle shifts. This Tuesday, the US earnings season kicked off, and while the market was initially focused on the performance of large banks, the tech sector stole the spotlight. A sharp decline in South Korean chip stocks triggered expectations of continued selling pressure on US tech stocks. Meanwhile, the entire US Treasury yield curve remains at a 20-year high, and the continuously rising interest rates are beginning to put downward pressure on equity asset valuations. A six-year policy shift: Rising US Treasury yields prompt BlackRock to restart bond allocations. BlackRock Investment Institute announced this landmark adjustment in a client report. For the past six years, underweighting US Treasuries has been a core principle of BlackRock's fixed income allocation. However, the current environment has changed: rising yields coupled with excessive market expectations of Fed rate hikes have created conditions for unwinding the underweight position in US Treasuries. The institution has upgraded short-term US Treasuries to overweight and long-term Treasuries to neutral. The core reason is that the current higher yields better compensate for the interest rate risk associated with holding bonds. Data comparisons are highly relevant: when BlackRock first underweighted US Treasuries in October 2020, the 10-year Treasury yield was only around 0.9%, while it has now reached 5.192%; the 2-year Treasury yield has risen from 0.16% that year to 4.778%, a level last seen since 2007. BlackRock's calculations show that bond investors can now obtain inflation-adjusted real returns rarely seen in decades. With ample asset safety buffers, yields need to rise another 75 basis points before bond investment returns turn negative. Source of Funds for Portfolio Adjustment: US Equities Shifted from Overweight to Neutral to Manage AI Market Volatility Funds used to increase holdings of US Treasuries partly came from closing long-term overweight positions in US equities, resulting in a downgrade of US equities to neutral. BlackRock emphasized that this is short-term risk management, not a reversal of its long-term core judgment; the fundamental logic of AI transformation remains valid. The firm explained that a high-interest-rate environment will accelerate corporate differentiation, and only companies capable of generating returns higher than the cost of capital will consistently outperform the market. While reducing its overall US equity position, BlackRock remains optimistic about AI supply chain companies and listed infrastructure assets. The scarcity of critical infrastructure supply and continued demand expansion can sustain strong returns, and the value of existing infrastructure assets is expected to continue to rise in a scarce environment. Even if the AI narrative experiences periodic fluctuations, BlackRock still believes that fundamentals will ultimately dominate the market. FactSet's analyst forecasts predict that S&P 500 earnings are expected to grow by 30% year-over-year in the third quarter. A spokesperson for BlackRock Investment Institute mentioned that the rating for US stocks has switched between overweight and neutral multiple times in recent years. It was downgraded to neutral in March of this year, then reverted to overweight in April, and this latest adjustment represents another tactical shift. The core disagreement behind this is a discrepancy between market expectations of interest rate hikes and BlackRock's assessment . The key contradiction in asset pricing centers on the future path of the Federal Reserve's interest rate hikes. Market pricing indicates that investors expect the Fed to raise interest rates by a cumulative 160 basis points over the next 12 months, but BlackRock believes this expectation is overpriced. Since September, the average term premium for long-term Treasury bonds has been approximately 75 basis points. The term premium represents the additional compensation investors require to hold long-term bonds; this increase means that US Treasuries currently offer a more attractive entry window. This is also the underlying macroeconomic logic of BlackRock's asset rebalancing: in a high-interest-rate environment, bonds are no longer low-yield sidelines but have become an important option in the portfolio for hedging against equity volatility and locking in stable cash flow.
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