Targeting Uncorrelated Returns in Uncertain Markets

Key points

  • The post-COVID era has seen increased market uncertainty and volatility, leading to a wider range of performance outcomes in stock and bond markets. Over this time, BlackRock’s Global Equity Market Neutral Fund (BDMIX) has consistently outperformed stocks and bonds whether markets were rising or falling.
  • These results are driven in part by BDMIX’s ability to pursue uncorrelated alpha1 sources, benefit from higher interest rates, and remain nimble as market conditions continually evolve.

A defining feature of the post-COVID investment regime has been the persistence of elevated market uncertainty and volatility. The below visual highlights how this has led to a wider range of market performance outcomes, focusing in on the vast difference between the last two calendar years. Stock and bond markets delivered negative returns in 2022 amid high inflation and rapidly rising rates. In 2023, enthusiasm over artificial intelligence and growth opportunities largely boosted stock returns, followed by a sharp cross-asset rally as disinflation fueled expectations for a soft-landing.

Over the full two-year period and 2024 to date, the visual illustrates how BlackRock’s Global Equity Market Neutral Fund (BDMIX) consistently outperformed broad markets regardless of whether stocks and bonds were rising or falling. In a portfolio context, the strategy delivered equity-like returns with lower volatility and near-zero correlations to stock and bond markets.2 In this insight, we’ll explore the different dynamics underpinning these results, and the potential to help investors navigate continued uncertainty throughout 2024 and beyond.

Inflation and policy uncertainty punished stocks and bonds throughout 2022...

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