Blackrock Not Buying the Dip in Stocks, Neutral for 6-12 Months

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Investment management giant Blackrock (NYSE:BLK) said Monday that it is not buying the dip in stocks as valuations haven’t really improved.

With markets suffering significant losses so far in 2022, there have been calls to ‘buy the dip,’ but Blackrock’s Global Chief Investment Strategist, Wei Li, said in a note that they are passing for now.

“Valuations aren’t much cheaper given rising interest rates and a weaker earnings outlook, in our view. A higher path of policy rates justifies lower equity prices. We also see a risk the Fed will lift rates too high – or that markets believe it will. Plus, margin pressures are a risk to earnings. That’s why we’re neutral on stocks on a six – to 12-month horizon,” Li wrote, adding that “there’s an increasing risk that the Fed overtightens or markets actually believe its tough talk on inflation.”

The third reason provided for their lack of dip-buying is that “a slowing restart and margin pressures spell trouble for head earnings estimates in 2022 and 2023.”

“We think central banks will eventually make a dovish pivot to save growth or avoid a deep recession. This is why we are overweight equities in the long run but neutral on a tactical horizon,” Li concluded.