BlackRock boosts outlook for US stocks after tariffs pause

The BlackRock Investment Institute said on Monday that it is taking a modestly more bullish stance on U.S. stocks following the announcement of a 90-day pause in implementing most U.S. tariffs.

The near-term risk of a “financial accident” has eased following the Trump administration’s decision to pause of hefty tariffs on most countries, according to a report from the research arm of asset management giant BlackRock.

“Policy uncertainty may weigh on growth and stocks in the near term. Yet we think the underlying economy and corporate earnings are still solid and supported by mega forces such as AI,” the BlackRock analysts said in the report, adding that they were overweight U.S. stocks.

Jean Boivin, head of the BlackRock Investment Institute, and his colleagues cautioned that “major uncertainty still remains” and that “ongoing risk asset volatility and potentially sharp reversals” are still likely.

The shift in view was a rapid reversal of a recommendation BlackRock disclosed only a week ago, in which it shifted its view on U.S. stocks to “neutral” from overweight, citing policy uncertainties.

At the time, the firm said it based that call on its forecast that “risk assets could stay under near-term pressure until uncertainty starts to dissipate” and that “if clarity comes quickly, we would up risk-taking again.”

Going forward, BlackRock said its stance on risk will hinge on policy decisions regarding tariffs.

The world’s largest asset management firm said last week that its total assets under management hit a record of $11.58 trillion in the first quarter of 2025.

Americans’ expectations for near-term inflation hit the highest level since the fall of 2023 in March, amid a souring in the public’s assessment of their personal finances and hiring prospects, a report from the Federal Reserve Bank of New York said on Monday.

The bank said that in its latest Survey of Consumer Expectations, respondents see inflation a year from now at 3.6%, up from 3.1% in February, matching the same level last seen in October 2023. The rise came as households predicted accelerating inflation for food and rent, but smaller gains for gasoline and home prices.

The sharp increase in near-term expectations came as the projected level of inflation three years from now held steady at 3%, while the forecast for inflation in five years tipped down to 2.9% in March from 3% the prior month.

The mixed outlook for inflation came in a report that found a broad decline in survey respondents’ views on where the economy is heading. Households in March said they see slower future income and earnings gains, while expectations that unemployment will rise hit its highest level since April 2020.

The New York Fed consumer expectations data lands in a climate where other indicators are pointing to a deteriorating economic situation, as President Donald Trump pursues an aggressive trade war heavily reliant on the highest levels of tariffs in decades. Economists and the public believe these import taxes will lead to increases in inflation pressures, although there’s great uncertainty about how long the boost in price pressures will last.

The New York Fed data pointing to confidence that longer-term inflation pressures will remain in check stands at odds with other closely watched surveys like that of the University of Michigan, which found that in April the expected level of inflation five years from now was at its highest since June 1991.

With economic conditions highly unsettled and current levels of inflation already above the Fed’s 2% target, Fed officials have over recent days flagged the particular importance of keeping longer-run expectations stable, noting shorter-run projections are generally more volatile and reactive to fast- moving factors.

“Despite the recent rise in short-term inflation expectations, longer-term expectations have remained well anchored,” New York Fed President John Williams said on Friday, adding “it is critically important” to maintain that situation. Speaking with reporters on Thursday, Chicago Fed President Austan Goolsbee said “if you start to see that people fundamentally don’t think that over the long run we’re getting back to 2%, that’s a problem.”

The Fed’s policy outlook is particularly complicated at the moment as it faces both rising inflation pressures and the strong likelihood of weaker growth. Thus far central bankers are taking a wait-and-see approach to their next interest rate move, but some analysts see the chance more bad news on longer-run inflation expectations could tip the scale in a hawkish direction.

“Fed speakers have stepped up the message that the focus now is on maintaining stable inflation expectations, and the underlying message is that effort could require rate hikes,” said SGH Macro Advisors.