BlackRock’s research arm, the BlackRock Investment Institute (BII), has downgraded its stance on emerging-market equities in its mid-2026 global investment outlook, while upgrading euro-area short- and medium-term government bonds. The change was reported by Bloomberg.
For the next six to twelve months the BII moved its recommendation on emerging markets from overweight to neutral. The institute cites concentration risks tied to companies exposed to artificial intelligence (AI), and highlights markets such as Taiwan and South Korea as particularly vulnerable because of the heavy weight of AI-related firms. The report notes that geographic diversification does not eliminate concentration risk if multiple markets are connected to the same value chain.
The warning came as emerging-market equities suffered their largest weekly loss since March in the week before the report, driven by another round of selling in the technology sector and rising expectations of tighter monetary policy from the Federal Reserve. As a result, the MSCI emerging markets index is headed for its worst month since the March low.
At the same time, BlackRock remains constructive on US equities and continues to overweight them. The firm says it seeks broad AI exposure via the US technology sector and believes that the ultimate winners in the technology competition are likely to be US-based companies, although the final outcome is not certain.
On fixed income, BlackRock upgraded euro-area short- and medium-term sovereigns from neutral to overweight, arguing that investors may be overstating how long monetary policy will remain restrictive. In contrast, the firm kept an underweight recommendation on long-dated US Treasuries.
According to the report, the perceived safe-haven role of long US government bonds has been weakened by more persistent inflation partially driven by large-scale spending on AI infrastructure. In credit markets there are no evident system-wide stresses: default rates remain low and returns are still attractive.
BlackRock prefers higher-rated US and European high-yield bonds over investment-grade debt, and within those high-rated issues favors short-dated corporate bonds because they are less sensitive to interest-rate risk.
Jean Boivin, head of the BlackRock Investment Institute, explained in the report that the market reallocation caused by AI will increase dispersion in credit markets, making idiosyncratic issuer selection increasingly important for future success.
This article is not investment advice or a recommendation.
Tags: euro area, bond market, Fed, monetary policy, artificial intelligence, equity market, BlackRock, emerging market, US equity, technology sector
