On April 3rd, BlackRock published on its WeChat public account stating that since the beginning of the year, global macroeconomic outlook has gradually improved, inflation in developed markets has cooled down, monetary policy is facing a shift, and the market's expectations for interest rate cuts are becoming clearer. Compared to the beginning of the year, the short-term market risk appetite has increased, and positive market sentiments are expected to continue. Looking ahead to the second quarter, BlackRock believes that investors adopting actively adjusting their portfolios will likely see returns. Now is not the time to engage in "autopilot" investing, but rather to take control of investment direction. At the same time, being cautious in addressing macro risks is very important. Three major investment themes remain key Managing macro risks In the current new landscape, inflation stickiness and higher structural interest rates are present. The market is still adapting to this new environment, so understanding the macro environment is crucial for risk management. Increased short-term market risk appetite As inflation in developed markets gradually cools down, BlackRock sees an increase in short-term market risk appetite and believes that positive market sentiments are likely to continue. The inflation levels of major developed market economies have been steadily declining since reaching a peak during the pandemic, and they are expected to stabilize at close to 2% this year, which will help central banks in these markets to initiate interest rate cuts. Despite the Federal Reserve adjusting its inflation and economic growth expectations, the latest forecasts announced in March still suggest that the Fed is likely to cut interest rates three times this year, each time by 25 basis points. After signals released by the Federal Reserve recently, BlackRock believes that market pricing reflects an overly high expectation for a comprehensive slowdown in inflation (inflation levels dropping to near the Fed's 2% target while economic growth remains unchanged), a situation that may face challenges. Cautiously addressing macro risks BlackRock's core viewpoint is that in a world dominated by supply, economic activity will exhibit lower growth trends. For example, although the US economy showed resilience in 2023, economic activity in the US still remains below its pre-pandemic growth levels. In a previous investment outlook, BlackRock mentioned that the current new global macroeconomic landscape is facing sustained structural inflation pressure. Due to falling commodity prices, BlackRock believes that inflation levels in the US may further drop to 2% this year. However, as the drag from commodity deflation gradually fades and wage growth continuously rises due to labor shortages, the inflation level in the service sector may be higher than pre-pandemic levels, leading to a possible resurgence in inflation by 2025. Furthermore, disruptive trends (or structural shifts that can drive returns) could also raise inflation. Therefore, BlackRock believes that with policy rates of central banks being higher than pre-pandemic levels, the inflation rate may approach 3%. In this context, BlackRock recommends flexible portfolio management and cautious handling of macro risks. Taking control of investment direction Market adjustments target the expectation for a 2024 earnings growth of the S&P 500 index and anticipate that the proportion of technology sector earnings will reach half of the S&P 500 index. In January of this year, BlackRock tactically held an overweight view on US stocks and tended to favor investment opportunities related to the artificial intelligence theme. BlackRock believes that with more industries adopting artificial intelligence, along with signals recently transmitted by the Fed and the gradually cooling inflation, market confidence has been boosted. Market risk appetite is expected to expand beyond the technology sector. BlackRock once again raises its overweight view on Japan; after stagnation for several decades, the Japanese economy is gradually recovering, with Japanese corporate profits steadily rising, wages and inflation gradually picking up, injecting "brightness" into the Japanese stock market. BlackRock believes that the Bank of Japan's monetary policy stance will benefit the Japanese stock market. Strategically, BlackRock maintains a cautiously selective attitude towards fixed income investments. In February of this year, BlackRock reduced its overweight position in inflation-linked bonds, but with BlackRock's expectations for inflation being higher than market expectations, it still maintains an overweight position. BlackRock also sees profit opportunities in the private markets and relatively favors short-term bonds in developed market government bonds.