Instead, Powell emphasised: “We have no choice but to try to navigate through that world. Investors can’t choose the world they live in, they have to deal with this one.”
BlackRock sees a structural shift in the investment environment compared to the previous era known as the “Great Moderation”, where global policy stability and synchronised growth underpinned passive investing. Today, Powell warns: “It is much harder to have confidence about the macroeconomic context”, citing the difficulty of forecasting inflation, interest rates and trade policy amid ongoing tariff negotiations.
“This macro environment is radically different and radically less certain than it was in the previous epoch,” he says. “Therefore, as investors, anchoring into macro certainty we feel is much more difficult than it has been historically.”
In place of that certainty, BlackRock proposes a new framework based on five long-term “mega forces” that it believes will shape market returns for years to come: demographic divergence, AI and digital disruption, energy transition, geopolitical fragmentation and the future of finance. “These are going to provide structural priorities of returns across portfolios, both positive and negative,” says Powell.
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One example is the growing fragmentation of global trade, which makes selective exposure critical. “Dispersion is going to be bigger within asset classes and across asset classes,” says Powell.
The way he sees it, that means the alpha opportunity should be much higher today than it would have been during the “Great Moderation”. In other words, passive exposure no longer cuts it; active management is essential.
Asia in focus
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Matt Colvin, portfolio manager in BlackRock’s global emerging markets equities team, described a “moderately positive” outlook for Asian equities, with a strong emphasis on bottom-up, idiosyncratic opportunities over macro-driven bets. “It is a very fragmented macro environment,” he says. “We’re running less macro risk, less style risk, and much more idiosyncratic risk, trying to find companies that can outgrow earnings.”
In China, Colvin pointed to stabilised housing prices in key cities, which support household wealth effects. He also highlighted how policy constraints are accelerating domestic innovation. “Constraints require you to be more resourceful and more innovative, and so we’re seeing that,” he says. “It’s very much China going to the world,” he notes, particularly through overseas expansion in electric vehicles (EVs), batteries and renewable energy.
On India, Colvin was even more upbeat. “I think India is a generational opportunity,” he says, citing steady 10% nominal GDP growth, expanding discretionary income, and operating leverage among consumer and tech firms. “There’s import substitution, consumer spending growth, and continued fiscal support. Apple, for example, is opening factories there,” he adds.
In Asian credit markets, Yii Hui Wong, portfolio manager in the Asian fixed income and credit team, described a landscape of extremes, where volatility is driven by policy uncertainty, but also improving fundamentals. “We saw the despair post-Liberation Day and the subsequent euphoria on policy retracement and negotiations for a 90-day pause,” she says.
Despite this, Wong argues that Asian credit offers compelling opportunities, particularly in short-duration, higher-carry instruments. “Asian credit is also shorter in spread duration overall compared to global counterparts. Thus, it takes a lot more spread widening to impact returns to the same magnitude,” she adds.
She also pointed to structural improvement in the credit universe. “Asian IG [investment grade] currently makes up more than 85% of the Asian credit universe, versus 80% in 2021. Property now accounts for less than 2%, versus 11% then,” Wong says.
Meanwhile, Elaine Wu, head of Apac investment and portfolio solutions, highlighted shifting investor sentiment and fund flows. “More than 20% of our international clients are currently looking at whether to take down some of the US and US dollar exposure versus benchmark,” she said.
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In terms of flows, Wu reported that from April to June 2025, US$19 billion ($24.41 billion) moved into China equity ETFs, US$7 billion into Taiwan, and US$5 billion into Hong Kong ETFs. European equities have also seen a surge in demand, with year-to-date ETF flows reaching US$60 billion, the largest annual inflow since 2015.
Wu maintained that while the US dollar and US markets remain core to portfolios, the firm is advising clients to “incrementally diversify by region, sector or asset class”. This includes overweight allocations to Japan, strategies focusing on AI and financials, and fixed income diversification through European bonds and Asia credit.
On diversification, Wu also flagged rising bond-equity correlations and encouraged investors to look at alternative strategies. “Liquid alternative strategies provide absolute return in any type of environment,” she said. “And gold is one of the best-performing asset classes year to date ... it’s also a good hedge against geopolitical risks and potential depreciation of the US dollar.”
