Khaleej Times Exclusive: Blackrock Global Investing Chief Reveals Her Market Forecast

The artificial intelligence (AI) boom and strong corporate profit growth should continue to fuel stock market gains, but there are some potential red flags to watch, including rising interest rates, according to Wei Li, BlackRock Global Chief Investment Strategist.

Li shared her views exclusively with the Khaleej Times on asset allocation and the reasons why she is still positive on US equities, even as they hit record highs.

She discussed the US-Iran war's impact on markets and inflation, and how the anticipated public offerings of three mega US technology companies this year - SpaceX, OpenAI, and Anthropic-could present a near-term test for the market.

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She discussed the US-Iran war's impact on markets and inflation, and how the anticipated public offerings of three mega US technology companies this year – SpaceX, OpenAI, and Anthropic – could present a near-term test for the market.

“We are currently risk on, because of strong earnings momentum, driven, in particular, in the US by the AI buildout,” she said in the interview last week.

The buildout includes the construction of data centres worldwide, and Li said the spending on them is estimated to reach $6 trillion, a number that keeps growing, by the end of the decade.

The Iran war 's pressure on supply chains – particularly energy – has accelerated interest in an investing theme that was already underway in the global markets, where AI spending converges with the demand for energy and raw materials, like copper.

BlackRock Investment Institute strategists in a recent note said they favour what they call“electro tech” – which includes batteries, power electronics and electric motors at the heart of AI, energy, infrastructure and defense. The buildout of AI is tightening the links between tech and the key energy, utilities and infrastructure sectors.

Preferring equities

“We like growthy exposures – equities – and tech equities, US equities, and emerging-market equities in particular – more than we like credit at this point, and more than we like global government bonds, specifically US long duration government bonds,” Li said.

Li noted that the speed of the AI spending is unprecedented, faster than previous industrial revolutions.

What is different right now, compared to earlier in the AI transformation, is that the big tech companies no longer have as much free cash flow as they once had.

Big tech is spending intensively on AI, and they are also issuing debt to help fund it. Investors had been worried about the extensive amount of spending, but Li notes the earnings momentum alleviates that concern for now.

“This is why we are overweight emerging market and US equities because they are the bright spot of earnings upgrades and earnings strength,” she said.

“The expectation for this year's 2026 earnings growth for the US IT sector at the beginning of the year was about 30 per cent, and they have subsequently been revised to 44 per cent. The equivalent for emerging market equities at the beginning of the year was less than 20 per cent, and they have been subsequently revised higher to just shy of 40 per cent.”

The war has intensified the need for energy security.

“Everybody's going to be talking about it. Every company is going to be talking about it, and government is going to be talking about it – energy security, resource nationalism, data center security, supply chain resiliency,” she said.

“That's a theme that's getting accelerated by what's happening now, but it's been a theme quite a long while in the making.”

That means an“all of the above” view of energy investment in renewables as well as oil and gas. She added that the energy transition has also been reshaping opportunities across markets, in clean tech and“electro tech.”

“I would flag utilities and grids. Utilities and grids are central to the energy transition,” she said.

The disruption of energy production and shipping traffic through the Strait of Hormuz has created supply constraints and driven prices sharply higher globally. AI buildout and data centers are adding to that inflationary pressure.

That has helped drive up interest rates, and Li expects they could go higher.

“Through the course of the last almost three months or so, since the beginning of the war, (government bond) yields have pushed higher, even when markets were nervous,” she said. Typically, US Treasury yields would fall in a time of stress because investors had viewed them as safe havens. Yields move opposite bond prices.

“To us, that is evidence of Treasuries not being as effective as a portfolio diversifier compared to before,” she said.

“That has everything to do with the persistent inflationary pressure in this world shaped by supply constraint.” For that reason, investors should be demanding more yield for holding longer duration bonds in their portfolios. She prefers high quality bonds of shorter duration.

An environment where interest rates are heading higher could become problematic for stock market gains.

Li said investors need to pick their spots carefully.

“If future cash flow actually is also increasing, and in fact, at its current juncture at a faster pace compared to how quickly yields are moving higher, then equities can still outrun the increase in rates,” she said.

“But this is an environment where we've got to be a bit more selective. We've got to be a bit more discerning. It's not a rising tide lifting all boats.”

Li said the three big mega initial public offerings expected to launch in the US this year are a positive sign for stocks.

“In the very near term, it signals confidence in the market. This is also why markets are responding warmly to the announcements,” she said.

“It supports the AI momentum... The fact that they want to get liquidity to then invest suggests their own confidence in the AI transformation too. But it is potentially a notable liquidity drain when it does happen in the second half of this year.”

The first of the three – Elon Musk's SpaceX – is expected to go public in June, followed later in the year by frontier AI companies OpenAI and Anthropic. Li said investors will need to watch the impact on liquidity in the market from the three big IPOs.

“I think the estimates of how much liquidity drain that could represent is about $200 billion,” she said.“That is happening against the backdrop of corporates previously not issuing a lot of debt and now issuing more debt. So that's, again, draining liquidity and financing from the market.”

Li said there's a risk that liquidity dynamics could have a near-term impact on the market.

“That's something that could change market direction in the near term. So, we're definitely paying close attention to that,” she said. But ultimately, she adds, it is fundamentals that drive long term returns.

“One of our key investment themes for 2026 is called Micro is Macro. And that describes an environment where AI spend is driving the macro picture. It's so sizable that micro has become macro. And this is a notable change from previous periods where macro is driven by lots of top down monetary and fiscal policies,” she said.

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