- Top BlackRock investment official suggests investors go overboard with equity exposure
- Portfolios should readjust to include assets with high risk/reward ratios
- Bitcoin stands to gain from such a proposition
JAIPUR (Coinchapter.com) – Wei Li of the BlackRock Investment Institute recently suggested investors dial-up their risk exposure. She pegs her viewpoint on the positive near-term unraveling of the current macroeconomic complexity. According to the Global Chief Investment Strategist, it is a favorable scenario to go heavy on stocks.
As we headed into 2021, with vaccine breakthrough, the light at the end of the tunnel definitely points to risk-on, and from our asset allocation perspective, we also like risky assets for emerging market equities and US equities.she told CNBC International TV in an interview on January 4,2021
Three-Pronged Economic View
Ms. Li’s arguments for increasing appetite in risky investments stem from a three-pronged approach. First, one that could help make sense of the ongoing ‘turbulence’ in financial markets.
- Economic activity resurgence in the US fanning out to Europe and Japan – The accelerated pace of vaccination across the said geographies hints at pre-COVID commercial growth.
- New virus strains to delay but not entirely dampen economic restart – The efficacy of the latest COVID jabs strengthens this viewpoint.
- Monetary policy responses to rising inflation “will be more muted than in past crises or economic cycles” – Central banks, for example, the European Central Bank, will continue to harbor a dovish stance towards economic growth.
Hence, according to the institutional investment executive, market participants can ‘play it risky.’
The combination of these three prongs is why we advocate investors take an overweight position in equities in their portfolios on a tactical, or six-to-12-month, horizon.noted Ms. Li
While in January, Ms. Li suggested going long on the US and emerging market stocks, entering long positions predominantly in European equities is what she recommends now.
Bitcoin Stands To Gain
Bitcoin would be an unintentional benefactor of Ms. Li’s three-pronged macro-economic outlook, especially since central banks are expected to ‘keep it dovish’ amid the delta variant outbreak. This is precisely what led the flagship cryptocurrency to register tremendous growth over the last one and half years.
When the pandemic became official in March 2020, the U.S. Federal Reserve dropped interest rates near zero, coupled with a massive liquidity pump to prop up the U.S. economy.
Consequentially, the BTC/USD spot pair, after crashing to $3702, exploded to $65,000 in April this year, marking a 943% growth. Thus, even after dropping more than 50% from its all-time high this year, Bitcoin is still up 900% compared to March 2020.
A continuing dovish stance by central banks, especially the Fed, indicates that inflation is here to stay. Thus, building a favorable scenario for Bitcoin.
Honestly, I don’t know which scenario is most plausible. But the risk is rising that at some point inflation could become an issue. If the divergence between inflation and bond rates continues to be high, betting on gold and #Bitcoin seems like a good idea.observed Ecoinmterics a Twitter-based Bitcoin market insights provider
Bitcoin could eventually assume precedence over gold as an effective store of value, noted Ecoinmetrics, given its negative correlation with bond yields (and the depressing yield markets).
#Bitcoin itself tends to be uncorrelated to the real yield. But a negative real yield environment created by high inflation is good for the narrative. With the price already depressed some investors might decide to bet on Bitcoin rather than gold as a store of value.