The masters of the universe, otherwise known as the institutions that call upon investor capital (individual citizens or even entire governments), can often act as a proxy for what the global economy is going through and, more importantly, where it is headed.
Today, one of the world's largest asset managers has reported quarterly earnings results, where investors can find where money is being moved and where clients are being advised to invest. A little-known indicator of future performance can be dissected in these documents: welcome to the big leagues.
After a swift reaction to the release, BlackRock (NYSE: BLK) stock has changed little, which can be a good thing to start. Still, the juice that can really make you take a second look at the market lies ahead within the data-driven assumptions of the finance titan.
Sign of the Times
Understanding what BlackRock's most prominent clients are doing, otherwise known as those fish that typically stick to the big sharks for leftover food and protection, can give you an inside look into where the sharks are hunting for alpha.
Investors like Warren Buffett were criticized for keeping a large cash balance when the stock market eked out single to double-digit returns. Yet, it looks like the big guys are following suit this quarter.
Regarding banking stocks, you can get a pulse on what has transpired year-to-date. Through the Financial Select Sector SPDR Fund (NYSEARCA: XLF), the performance of most of these names can be checked live, and 2023 could have been more exciting with a close to 0.0% performance.
Beginning with what is likely to make headlines soon, net inflows and outflows to and from the bank's clients and products can be a tremendous first pillar upon which to build your outlook.
In the case of flows, BlackRock saw its first net outflows since the outset of the COVID-19 pandemic, with a total of $13 billion pulled from long-term investment fund products; where is all the money going? The answer may surprise you.
Clients are choosing to pivot their funds into money market products and other bond strategies. Can you blame them for wanting to take some risk off the table and instead take advantage of the near 5.0% yields that treasuries offer today?
Within these reports, an undisclosed international client pulled out as much as $19 billion from equity index products. This department saw its AUM (assets under management) fall by as much as $49 billion.
These moves are typically tied to advice coming from either 'family shops' or insiders at BlackRock advising on their clients' best interests, and the view driving the advice is what you came here for.
Considering that the S&P 500 has been struggling to break past its last point of resistance, and darling stocks like Apple (NASDAQ: AAPL) and even Walt Disney (NYSE: DIS) have been struggling with price declines, it makes sense that the house view is far from optimistic about stocks.
What are other investors to do with this information? As intimidating as it may seem, following the money is straightforward. Suppose the big guys are beginning to hoard liquidity for better prices, buying bonds, or seeking yield. In that case, there are ways you can follow the strategy.
MarketBeat offers a great screening tool, which allows you to find high-quality, profitable stocks at dirt-cheap valuations, sending you miles ahead of everyone else scrambling and waiting for BlackRock's next release.
For everything else regarding bonds, there are two main players stepping up to the plate, offering upside and yield at the same time. If bonds seem too boring for you, check out these stocks offering high yields with upside appreciation potential as well.
If bonds excite you, congratulations on being one of the few savvy investors. The Vanguard Short-Term Inflation-Protected Securities ETF (NASDAQ: VTIP) is a great way to generate yield. At the same time, inflation remains high and will get some appreciation once inflation inevitably lowers to the FED's 2% target.
While Vanguard's ETF offers a 3.9% dividend yield, there is another ETF out there beating this rate and offering similar upside potential. The iShares Core 10+ Year USD Bond ETF (NYSEARCA: ILTB) comes to save your newly liquidated cash with a 4.8% yield.
There you have it; now you are armed with BlackRock's advice without paying the endless fees required for a proper sit down with the pros. Whether you take the equities route, the bonds route, or both, you too can beat the market this coming quarter.