Certainly, I can provide more details drawing from the sources to enhance

your understanding of BlackRock's 2025 Midyear Global Outlook.

BlackRock's outlook emphasizes that the world is losing long-term

macro anchors that have guided investment for decades, leading to
elevated uncertainty. This is not merely a cyclical adjustment but a
profound, structural transformation shaped by "mega forces".

Here are more details on the core concepts and investment implications:

1. Losing Long-Term Macro Anchors: The Core Challenge

The traditional foundations for long-term asset allocation are weakening:

 Inflation expectations are no longer firmly anchored near 2%

targets.

 Fiscal discipline is ebbing away, with persistent budget deficits.

 The compensation investors want for holding long-term U.S.

Treasuries (term premium) is rising from historically suppressed
levels.

 Confidence in institutional anchors like central bank

independence and the traditional haven role of U.S. assets has been
shaken.

This means investors can no longer rely on broad asset class returns
converging back toward long-term averages, as they did before the
pandemic when stable growth, low inflation, and supportive monetary
policy made it easier to generate returns from static exposures to broad
indexes. Equity returns have become twice as sensitive to economic
and trade policy surprises post-2020, as investors try to infer long-
term signals from short-term data.

2. Immutable Economic Laws: Limiting Near-Term Outcomes

Despite the long-term uncertainty and policy shifts, BlackRock believes

immutable economic laws prevent the world from being "revamped
overnight". These laws narrow the range of near-term outcomes and offer
a degree of predictability:

 Supply chains cannot be rewired quickly without major

disruption. This constraint was evident in rapid tariff carve-outs and
the restart of U.S.-China trade talks, as companies cannot source
inputs elsewhere overnight.

 U.S. debt sustainability relies on steady, large funding from

foreign investors, who hold about a quarter of U.S. Treasuries. Any
significant falloff in foreign demand could cause yields to spike,
 forcing a policy response. This fragile equilibrium of elevated debt,
sticky inflation, and higher interest rates makes U.S. Treasuries
vulnerable.

This understanding of policy limits allows BlackRock to dial risk back up

even after events like tariff announcements, staying "pro-risk on a tactical
horizon" because there's "more certainty about the near-term macro
outlook than the long term".

3. Investment Implications: Three Key Themes

A. Investing for the Here and Now (Tactical Horizon)

Given the clearer near-term outlook, BlackRock emphasizes tactical

views (six- to 12-month horizon).

 They maintain a broadly pro-risk stance and overweight U.S.

equities. This is driven by the AI theme and expectations for solid
U.S. corporate earnings, even with potential tariff-induced
disruptions.

 They are ready to lean against sharp market swings if markets

overreact to short-term news, viewing such selloffs as opportunities.

 Europe is seen as unlikely to outperform without significant

structural reforms, despite recent periods of outperformance being
increasingly rare. BlackRock prefers U.S. corporate profitability and
sees U.S. valuations backed by stronger earnings. They are selective
in European equities, favoring financials, defense, and
infrastructure-tied industries.

B. Taking Risk with No Macro Anchor (Alpha Opportunities)

BlackRock believes the current environment of transformation offers

exceptional potential for achieving above-benchmark returns
(alpha), more so than the prior decade. However, this requires active
management of macro risk.

 Persistent U.S. inflation pressures are expected due to

geopolitical fragmentation, slowing immigration, and the eventual
direct impact of tariffs. Wage growth is still considered too high for
inflation to return to the Fed's 2% target.

 They anticipate the Federal Reserve will hold rates steady for
clarity on tariff impact, and persistent inflation will limit how far the
Fed can cut rates, even if growth is impacted.

 Alpha can be generated through specific types of risk-

taking:
 o Relative value risk: Positioning for convergence or
divergence in security prices.

o Potential deregulation/regulatory changes: Opportunities

arising from policy shifts, such as in cryptocurrencies.

o Positioning risk: Recognizing and capitalizing on crowded

markets.

o Liquidity risk: Providing liquidity during periods of market

stress.

 Top-performing managers have delivered more alpha since

2020, while static factor exposures have become a bigger drag for
median managers, underscoring the need for active macro risk
management.

C. Finding Anchors in Mega Forces (Durable Return Drivers)

Mega forces – structural changes like artificial intelligence, geopolitical

fragmentation, and the energy transition – are considered durable
drivers of returns and serve as "new long-term anchors".

 These forces require constant tracking across and within asset

classes because their "end state" is uncertain, and they don't map
into broad return drivers like traditional macro anchors.

 The transformation is largely driven by surging capital spending,

particularly by "hyperscalers" powering AI's expansion. This capital
spending and infrastructure are at the heart of many mega forces.

 Private markets are playing a growing role in funding the

infrastructure, energy systems, and AI buildout, blurring the lines
between public and private assets.

4. Focus Areas: Deeper Dive into Key Themes

 Deepening Fragmentation: This mega force has accelerated,

driven by global shocks and the U.S. reordering its relationships.

o In Europe, it's driving increased defense spending, which

has reached NATO's 2% of GDP target after years of
undershooting, and is set to rise further (some NATO members
committing to 5% of GDP). This creates opportunities in
defense, infrastructure, and financials in Europe.

o Technology is now a key part of national security, with

the U.S. viewing AI as a "force multiplier".
 Taking Stock of AI’s Phases: AI's evolution is seen in three
phases:

o Phase 1: Buildout: The race to construct AI's infrastructure.

BlackRock favors hardware makers and sectors benefiting
from this buildout, notably the utility sector, which is seeing
soaring power demand from data centers and increased AI
mentions in earnings calls.

o Phase 2: Adoption: AI being integrated into applications and

software.

o Phase 3: Transformation: AI adoption potentially boosting

productivity, creating new business models and industries.

o AI intersects with other mega forces, including energy

transition and geopolitical fragmentation.

 Tapping Private Capital: Private capital's growing role is

transforming how investors build portfolios.

o Companies are staying private longer, leading to a surge in

U.S. private credit assets ($1.7 trillion by 2024), reducing
reliance on traditional bank loans and potentially reducing
systemic risk.

o This shift means investors need to manage factor exposures

more explicitly given the less liquid nature of private assets.

 Transformation = Infrastructure: Infrastructure assets are

considered core to the economic transformation due to their link
with mega forces.

o Indebted governments will need private capital to finance

infrastructure needs.

o Big companies are partnering with private investors to unlock

capital tied up in infrastructure, transforming these into
financial assets.

o Private infrastructure assets under management are

estimated to grow past $2 trillion by 2028.

o Infrastructure offers stable cash flows and yields that

typically track inflation, providing a tool to protect
portfolios from volatile inflation.
  U.S. Assets Still Core: Despite questions raised by market
volatility, U.S. assets remain central to portfolios, though with
increased selectivity.

o This is backed by economic resilience, tech leadership

(especially AI), and robust corporate earnings.

o U.S. return on equity remains well above historical

averages and global peers, supporting its valuation
premium.

o The weak U.S. net international investment position (NIIP) is

not seen as a threat, as it reflects a strong dollar and global
demand for U.S. risk assets, rather than worsening current
account deficits. However, rising fiscal deficits pose a bigger
challenge.

 U.S. Dollar’s Dominant Role: Despite a recent 10% slide against

major currencies, the dollar's role as the "backbone of the global
financial system" is expected to persist.

o The dollar appears on nearly 90% of all foreign exchange

transactions.

o The growth of FX swaps illustrates the dollar's centrality in

cross-border finance.

o Increased demand for term premium in U.S. bonds is

consistent with recent dollar weakness, and further rise could
add to downside pressure, as could increased hedging of
currency risk of U.S. assets. BlackRock doesn't have strong
conviction in currency views but sees potential for higher
yields in EM.

5. Big Calls (High-Conviction Views)

BlackRock provides both tactical (6-12 month) and strategic (over 5 years)
high-conviction views:

Tactical (6-12 months):

 Equities:

o Overweight U.S. equities: Due to AI theme, earnings

support, and stronger profitability.

o Neutral Europe: Watching structural challenges, but

selective opportunities in financials, defense, and
infrastructure.
 o Overweight Japan: Driven by the return of inflation and
shareholder-friendly corporate reforms; preferring unhedged
exposures.

o Neutral UK, Emerging Markets, and China: Due to various

factors like corporate tax burden, geopolitical tensions, and
structural challenges.

 Fixed Income:

o Overweight Short U.S. Treasuries: Viewed as akin to cash,

leaning against market pricing of multiple Fed rate cuts.

o Underweight Long U.S. Treasuries: Due to persistent

budget deficits and inflation pressures pushing up term
premium.

o Overweight U.S. agency MBS: Compelling income and

preferred over U.S. Treasuries for high-quality fixed income.

o Overweight Short-term Investment Grade credit: Better

compensation for interest rate risk.

o Neutral Euro area government bonds, UK gilts, Global

inflation-linked bonds, China government bonds, Global
high yield, Asia credit, and EM local currency.

o Underweight Japanese government bonds and EM hard

currency.

Strategic (Over 5 years):

 Infrastructure equity and private credit: Seen as offering

opportunities due to attractive relative valuations and their role in
mega forces.

 Fixed Income Granularity:

o Prefer short-term inflation-linked bonds over nominal DM

government bonds due to potential U.S. tariff-driven inflation.

o Within DM government bonds, favor UK gilts over other

regions.

 Equity Granularity:

o Favor emerging markets over developed markets, with a

specific liking for India (demographic dividend) and Japan
(inflation, corporate reforms).
 o Maintain greater-than-benchmark size in U.S.
technology due to AI's role as a return driver.

This detailed breakdown aims to provide a comprehensive picture of

BlackRock's perspective, emphasizing the shift from relying on long-term
macro anchors to navigating a world shaped by immutable laws in the
near term and mega forces in the long term.