A new world order is coming for the stock market, explains BlackRock CIO

Making money in the stock market will likely look different in the next few years compared to the era of low interest rates seen since the end of the Great Financial Crisis, says Tony DeSpirito, CIO of US fundamental equities at BlackRock.

“It’s a big deal,” DeSpirito says on Yahoo Finance Live.

DeSpirito explains that since the end of the financial crisis, the economy has experienced very low growth, very low inflation, and very low rates. But those factors largely ended during the pandemic, with that regime being one with high inflation and a love of stay-at-home stocks.

Now things are changing once again, as home prices have soared higher at this point in the pandemic, stock prices remain elevated, the unemployment rate is below 4%, and rates of interest are directed upwards.

This emerging backdrop means investors have to look for companies that have pricing power and sell unique products. Overall, it will be a more complicated context for investors to navigate, DeSpirito acknowledges.

“This is fertile ground for individual stock pickers,” says DeSpirito.

To be sure, investors are showing distress at this regime change, DeSpirito predicts.

A majority of investors, 64%, expect the S&P 500 to fall below the 4,000 level this year, according to a new survey of Bank of America fund managers released Tuesday. The S&P 500 is currently slightly above 4,400.

Despite the rising market risks, professionals tend to agree with DeSpirito that it makes sense to keep stocks overweight. It just comes down to being more selective than in recent years.

“We want to lean into parts of the market where there’s quality,” Kristen Bitterly, Citi’s director of global wealth investments in North America, tells Yahoo Finance Live.

brian sozzi is a general editor and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and in LinkedIn.

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