(Bloomberg) — The world’s largest asset manager is leaning on the stock market’s post-election rally after moving away from risk exposure in the run-up to the election.
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More than $1.9 billion flowed into the $13 billion iShares MSCI USA Momentum Factor ETF (ticker MTUM) on Friday, the largest single-day flow since the fund launched in 2013, data compiled by Bloomberg show. At the same time, a record $1 billion exited the $32.5 billion iShares Core Total USD Bond Market ETF (IUSB). A BlackRock spokesperson confirmed that the company adjusted its model portfolio allocations last week.
The inflows of funds into MTUM reflect BlackRock’s belief that US stocks – fresh off their best weekly performance of 2024 – will continue to rise as a “coil spring” of pent-up corporate activity unwinds. Now that election uncertainty has been resolved, corporate capital allocation decisions that were previously suspended will resume. That’s why the company’s model portfolio team, which oversees some $131 billion in assets, is increasing its overweight in equities from 3% to 4% heading into the end of the year.
“Rather than trying to thread the needle with tactical sector or industry bets tied to specific election outcomes, we are positioning ourselves for a broader relief rally that we believe will transcend party results,” said Michael Gates, lead portfolio manager of BlackRocks Target Allocation ETF model. portfolio suite wrote in November 8 investment commentary. “This ‘uncertainty discount’ embedded in market prices should begin to thaw as companies and investors regain their footing and attempt to execute on postponed strategic initiatives.”
Model portfolios – in which funds are pooled into ready-made strategies to sell to advisors – have proliferated in recent years. Broadridge Financial Solutions estimates that model assets are likely to reach $5.1 trillion by the end of 2023, and could reach $11 trillion by 2028. As a result, even small adjustments can cause major shifts in ETF flows.
In addition to the post-vote clarity, Gates wrote that recent economic data — showing the labor market cooling while growth remains resilient — should support the Federal Reserve’s rate-cutting campaign, adding to the company’s bullishness.
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