BlackRock senior portfolio manager Tom Becker calls 2025 a "boring rally." He observes that the low volatility of the last three quarters — when the release of Taylor Swift's movie seemed more significant than trading sessions — hides a fragile equilibrium that investors mistakenly mistake for long-term stability.
Instead of following the general market rally, the BlackRock team intends to focus on monitoring deep imbalances that will be the main drivers of returns in 2026. BlackRock explains which "red flags" investors should watch out for in the next 12 months.
The Fed versus Europe
Today, markets are operating in what is known as Goldilocks mode—an idealized expectation that tax breaks in the US, European rearmament, and AI dominance will ensure endless growth without inflation. Becker, however, warns that this equilibrium is based on the "good faith" of central banks.
BlackRock's main focus in 2026 is the "balance sheet confusion" of regulators. While the central banks of Europe and the UK have successfully completed the withdrawal of liquidity accumulated during the pandemic, the US Federal Reserve and the Bank of Japan are delaying the normalization of their balance sheets. The Fed, having completed one quantitative tightening program, has effectively begun new asset purchases. Becker quotes US Treasury Secretary Scott Bessent, who acknowledged that "no one understands" the mechanics of how the balance sheet works today.
Analysts will be watching this process most closely, expecting that the accumulated imbalances will sooner or later lead to a shake-up in the bond market. A key focus for BlackRock will be the divergence in central bank policy and the Fed's balance sheet: analysts plan to monitor how new asset purchases and the end of quantitative tightening will affect financial conditions in the US. Becker notes that the company will closely monitor the level of reserves at US commercial banks, whose collapse in the third quarter created difficulties for the regulator. The goal of this monitoring is to identify opportunities in markets with tighter and more predictable policies, such as Europe, Canada, and Australia. BlackRock is betting on short positions in these countries' government bonds.
AI euphoria and detachment from reality
Another critical area of concern is the gap between the profitability of corporate giants and the real state of the economy. Becker points out that the profits of companies in the S&P 500 index grew last year thanks to tax breaks and faith in AI, while the broader economy showed much more modest growth.
BlackRock intends to closely monitor the effectiveness of capital expenditures on artificial intelligence. Strategists fear that the market is currently gripped by one-sided optimism about the return on investment in AI. "Financial literature is replete with historical episodes of excessive investment in capital expenditures," says Becker. Therefore, BlackRock managers are entering 2026 without fanaticism: they are reducing their positions in US stocks, waiting for the moment when reality catches up with inflated expectations. The company plans to track the S&P 500 margin against broad economic data so as not to miss the moment of overheating.
Regional dispersion
Becker's main thesis for 2026 is the definitive collapse of the model in which all markets grew together. In his view, the predictable synchrony of the 2010s has been replaced by chaos, which he calls "normalization of dispersion." "The conditions for country selection have returned, and this creates a rich set of opportunities for a broad-based macro investment approach," Becker argues. For BlackRock, this means a shift to monitoring individual countries, whose returns will now depend on their internal structure rather than the overall movement of indices.
According to Becker, a fundamental divide has emerged in Europe: countries whose economies are tied to the service sector and raw materials (the UK, France, Italy) are showing relative stability. At the same time, the region's "industrial core" — Germany and Sweden — is under pressure due to its high sensitivity to the industrial downturn. Instead of buying broad indices, BlackRock prefers the UK and French markets, which appear to be undervalued, and is opening short positions on the overheated German market.
The situation in emerging markets is also no longer uniform, Becker believes. India and Brazil, which are awash with capital, may face difficulties, while other emerging countries still have room to cut interest rates.
The old rules no longer work
According to Tom Becker, investors should be patient, primarily because the current market equilibrium is extremely fragile and prices for many assets are unreasonably high. The two-year rally has attracted too many participants to the same securities, creating a dangerous situation of market complacency, where real macroeconomic risks are simply ignored. In such conditions, the usual strategy of buying a broad index ceases to be safe and effective.
"When the old rules don't work, patience becomes the most valuable asset," Becker sums up. Instead of searching for the next AI star, BlackRock plans to exploit the differences between countries. 2026 will belong to those who can find returns where most people don't see them — outside the overheated US market. According to Becker, in a world where the market is moving by inertia, returns will depend not on the general optimism of the crowd around American tech giants, but on the ability to find local dislocations — moments when prices in a particular country do not correspond to its real economic condition.
This article was AI-translated and verified by a human editor
