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Market take
Weekly video_20260601
Michel Dilmanian
Portfolio Strategist
BlackRock Investment Institute
Header:
CAPITAL AT RISK. MARKETING MATERIAL.
Opening frame: What’s driving markets? Market take
Camera frame
Title slide: Midyear Forum: speed meets scarcity
The biggest developments of the year, namely surging AI investment and the Middle East conflict, show how mega forces are driving the investment landscape. These developments will be front and center at our Midyear investment forum this week.
1: A shifting investment landscape
The investment landscape is being reshaped by a world shaped by supply. This comes as mega forces – or big structural changes that affect investing here and now – are intersecting rapidly. This backdrop is the overarching theme of our Midyear Investment forum, which brings together 100 of BlackRock’s portfolio managers and investment executives.
Meanwhile, the AI theme is accelerating. The AI buildout’s planned capital spending – already at historic levels – has steadily climbed. Projected annual spending for the mega-cap hyperscalers is now approaching $1 trillion per year by 2028. This underscores our Outlook’s micro is macro theme playing out.
2: Lingering questions
But big questions remain about how the AI theme will play out. For example: is AI adoption translating into greater profit margins or revenue at the company level? Or is token usage for complex tasks eroding gains? Will AI investments pay off and justify valuations – and who will capture the value? So far, the AI theme has driven U.S. and some regional stocks to all-time highs, even as bond yields have jumped. Why? AI-driven earnings have been strong enough to help offset the drag from higher interest rates.
3: Intersecting mega forces
To be sure, disruption to the Strait of Hormuz is exposing the global economy’s dependence on critical energy flows. The longer the closure persists, the greater the risk of a broader supply shock, with Europe and Asia likely being hit harder. This reinforces how the mega forces we track are increasingly intersecting, as AI-driven demand collides with geopolitical fragmentation.
Outro: Here’s our Market take
Mega forces are shaping the investment environment. They’ll also play a key role in driving the debate at our midyear forum. We stay overweight U.S. equities on the AI theme but will stress test our tactical views at our Midyear investment forum this week.
Closing frame: Read details: blackrock.com/weekly-commentary
Surging AI investment and the Mideast conflict will be key topics as investors debate how mega forces are reshaping markets at our internal Forum.
AI-driven earnings pushed the S&P 500 to another record high. Brent crude oil prices slid on hopes for a U.S.-Iran deal to reopen the Strait of Hormuz.
The U.S. April payrolls data is expected to show modest but stable job gains, keeping the Federal Reserve focused on sticky inflation.
About 100 BlackRock portfolio managers and executives gather at our biannual Investment Forum this week as a world shaped by supply accelerates. Speed and scarcity are defining how mega forces intersect. The AI buildout and Mideast conflict spur questions about financing, energy security and interest rates as strong AI-driven earnings offset higher rates. Yet questions persist over valuations and the ultimate AI winners. These debates will shape our Midyear Outlook.
Download full commentary (PDF)
Scaling away
Hyperscaler capex estimates, 2026-30
Source: BlackRock Investment Institute, with data from Bloomberg, May 2026. Notes: Bars show estimated annual capital expenditures for selected hyperscalers based on forecasts from Q4 2025 and Q2 2026. Hyperscalers include Alphabet, Meta, Microsoft, Amazon, Oracle, Tencent and Alibaba.
The investment landscape is being reshaped by a world shaped by supply – and mega forces are increasingly intersecting and driving investment opportunities. This is the overarching theme at our Midyear Investment Forum. The AI buildout’s planned capital spending – already historic at the start of the year – has only accelerated. Mega cap hyperscaler investment estimates have soared in just two quarters, with projected annual spending now approaching $1 trillion by 2028. See the chart. This is testing the constraints we laid out in our 2026 Global Outlook. First, hyperscalers are financing the buildout via increased debt issuance as rates reprice higher, in line with our leveraging up theme this year. The AI buildout’s big power needs for data centers show where the AI theme crosses with the energy transition. And constraints are increasing from political opposition to data centers.
The massive AI buildout has seen our Outlook’s micro is macro theme unfold. But big questions remain about how the AI theme will play out. At the company level, is AI adoption translating into greater profit margins or revenues – or is token usage for complex tasks eroding other gains? Will AI investments pay off and justify valuations – and who will capture the value? AI is already creating winners and losers – so what comes next for disrupted software companies? This comes as a growing pipeline of big AI-related IPOs— such as SpaceX, OpenAI, and Anthropic — will likely increase competition for capital.
The AI theme has driven U.S. and some regional stocks to all-time highs, even as bond yields and energy prices have jumped due to the Middle East conflict and resulting disruptions to energy flows and supply chains. That’s because AI-driven earnings growth has proved strong enough to help offset the drag from higher interest rates. But disruption to the Strait of Hormuz is exposing the global economy’s dependence on critical energy flows: the longer the closure persists, the greater the risk of a broader supply shock – with a bigger hit seen to Europe and Asia. This reinforces how the mega forces we track are increasingly intersecting, as AI-driven demand collides with geopolitical fragmentation. These tensions will be central to debates at this week’s Forum bringing together about 100 of BlackRock’s portfolio managers and investment executives.
The jump in bond yields this year highlights how traditional portfolio ballast is less reliable — reinforcing our diversification mirage theme and the need for a more dynamic, whole portfolio approach to investing. That’s why we see a greater role for active returns, with hedge funds and private markets as portfolio diversifiers in this environment. How mega forces are forcing a rethink of the role of portfolio diversifiers – and portfolio construction itself – will be another key topic of debate. On a tactical basis, our overweight to U.S. stocks has worked out so far this year – and we were quick to dial up risk after the outbreak of the Middle East conflict. We have stayed underweight long-term U.S. Treasuries – and 10-year yields are near one-year highs. The outlook for interest rates will also be a key debate. The Midyear Forum helps us kick the tires on our tactical views for the second half of the year and refresh our investment themes for our Midyear Outlook on June 30.
Mega forces are shaping the investment environment – and the debate at our Midyear Forum. We stay overweight U.S. equities on the AI theme and resilient earnings but will stress test our tactical views.
Reports of a deal between the U.S. and Iran – including a reopening of the Strait of Hormuz – drove Brent crude oil prices down 11% this week to near $92 a barrel. The S&P 500 hit new record highs, led by semiconductor stocks on strong earnings tied to AI demand. The Philadelphia Semiconductor Index rose 5% this week and has gained in eight of the past nine weeks. U.S. Treasury yields pulled back from recent one-year highs, with the 10-year yield falling 14 basis points to near 4.43%.
Markets this week will focus on U.S. labor data, with April job openings and May payrolls testing whether the recent hiring strength is holding up. Payroll growth is seen modest but stable, reinforcing the view of a still-resilient labor market and keeping the Fed focused on sticky inflation. ISM surveys are expected to show ongoing growth, though higher energy costs from Middle East disruptions could slow momentum.
Past performance is not a reliable indicator of current or future results. Indexes are unmanaged and do not account for fees. It is not possible to invest directly in an index. Sources: BlackRock Investment Institute, with data from LSEG Datastream as of May 28, 2026. Notes: The two ends of the bars show the lowest and highest res at any point year to date, and the dots represent current year-to-date res. Emerging market (EM), high yield and global corporate investment grade (IG) res are denominated in U.S. dollars, and the rest in local currencies. Indexes or prices used are: spot Brent crude, ICE U.S. Dollar Index (DXY), spot gold, spot bitcoin, MSCI Emerging Markets Index, MSCI Europe Index, LSEG Datastream 10-year benchmark government bond index (U.S., Germany and Italy), Bloomberg Global High Yield Index, J.P. Morgan EMBI Index, Bloomberg Global Corporate Index and MSCI USA Index.
U.S. ISM manufacturing PMI
U.S. job openings; Euro area flash inflation
U.S. ISM services PMI
U.S. payrolls
Read our past weekly market commentaries here.
Our highest conviction views on six- to 12-month (tactical) and over five-year (strategic) horizons, June 2026
Note: Views are from a U.S. dollar perspective, June 2026. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding any particular funds, strategy or security.
Six- to 12-month tactical views on selected assets vs. broad global asset classes by level of conviction, June 2026
We have lengthened our tactical investment horizon back to six to 12 months. The table below reflects this and, importantly, leaves aside the opportunity for alpha, or the potential to generate above-benchmark returns – especially at a time of heightened volatility.
Six- to 12-month tactical views on selected assets vs. broad global asset classes by level of conviction, June 2026
Past performance is not a reliable indicator of current or future results. It is not possible to invest directly in an index. Note: Views are from a U.S. dollar perspective. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast or guarantee of future results. This information should not be relied upon as investment advice regarding any particular fund, strategy or security.
Six to 12-month tactical views on selected assets vs. broad global asset classes by level of conviction, June 2026
We have lengthened our tactical investment horizon back to six to 12 months. The table below reflects this and, importantly, leaves aside the opportunity for alpha, or the potential to generate above-benchmark returns – especially at a time of heightened volatility.
Past performance is not a reliable indicator of current or future results. It is not possible to invest directly in an index. Note: Views are from a euro perspective, June 2026. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast or guarantee of future results. This information should not be relied upon as investment advice regarding any particular fund, strategy or security.
INSIGHTS AND RESOURCES
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