Investors should look at short-term Treasurys rather than U.S. stocks as uncertainty tied to President Donald Trump’s tariff policies mounts, according to BlackRock. Jean Boivin, head of the firm’s Investment Institute, downgraded his outlook on U.S. stocks to neutral from overweight, citing rising trade uncertainty. However, he increased his rating on short-term U.S. Treasurys to overweight from neutral. “Trade tensions have triggered a risk asset selloff,” Boivin wrote in a Monday note to clients. “We see volatility persisting for some time, so we shorten our tactical horizon to three months and reduce risk-taking, turning neutral on U.S. equities and preferring short-term Treasuries.” The stock market cratered late last week after Trump unveiled a contentious plan to slap levies on foreign countries. Investors sold off stocks fearing the policy could hurt demand and slow the economy. While stocks are rebounding Tuesday, traders are on high alert given the market’s volatility over recent days. In Boivin’s view, the “extreme” uncertainty tied to trade policy catalyzed a broad sell-off of risk assets. It is unclear how long that feeling will persist, but equities will remain under pressure as long as it does, he said. Eventually, U.S. equities will regain leadership, Boivin said, citing “mega forces” such as artificial intelligence and the transition to a low-carbon economy as triggers. “For now, we shorten our tactical horizon … and reduce risk. A shorter tactical horizon means giving more weight to our early view that risk assets could stay under near-term pressure until uncertainty starts to dissipate,” Boivin wrote. But, “if clarity comes quickly, we would up risk-taking again.” Until then, investors should focus on short-term U.S. Treasurys as they attempt to flock to safety, Boivin said. BlackRock predicts Trump’s tariffs and the response from other countries will mean that interest rates and long-term yields will remain elevated compared with pre-pandemic levels. But Boivin said investors should stay away from longer-term Treasurys due to the U.S. deficit and sticky core inflation. Market participants can instead lean on gold to diversify returns in this environment, he said. Get Your Ticket to Pro LIVE Join us at the New York Stock Exchange!| Uncertain markets? Gain an edge with CNBC Pro LIVE , an exclusive, inaugural event at the historic New York Stock Exchange. In today’s dynamic financial landscape, access to expert insights is paramount. As a CNBC Pro subscriber, we invite you to join us for our first exclusive, in-person CNBC Pro LIVE event at the iconic NYSE on Thursday, June 12. Join interactive Pro clinics led by our Pros Carter Worth, Dan Niles and Dan Ives, with a special edition of Pro Talks with Tom Lee. You’ll also get the opportunity to network with CNBC experts, talent and other Pro subscribers during an exciting cocktail hour on the legendary trading floor. Tickets are limited!
