General Investing Powered by BlackRock® – September 2025 Reoptimisation

Market Overview and Impact

Over June to August, the summer months saw a continuation of the upward momentum in global equity markets, marking a shift from the tariff-driven volatility that characterised early spring. Following April’s sharp sell-off, sentiment gradually improved as the US administration demonstrated flexibility and made encouraging trade progress in negotiations with key partners, including an extended pause of heightened tariffs with China and advanced discussions with Europe. These developments helped ease trade-related uncertainties and supported a recovery in risk appetite.

In the US, equities found support from resilient consumer spending and a strong Q2 earnings season, with corporate results exceeding market expectations. Softer economic data and growing expectations of a US Federal Reserve (Fed) rate cut towards the end of August further fueled the positive momentum. The technology sector continued to lead performance, driven by robust results and sustained optimism around AI-related developments, albeit August saw a generally weaker month for tech stocks.

Outside the US, European equities benefited from fiscal support in defense and infrastructure, as well as an easing in trade tensions, while emerging markets found support from a weaker US dollar. China, in particular, drew attention as emphasis on domestic anti-involution policies gained traction and the tone of US-China relations shifted towards a relative escalation, helping lift investor confidence.

Fixed income markets remained volatile over the summer, shaped by shifting expectations around US inflation and Fed policy, fiscal sustainability challenges, and concerns over the Fed’s independence. Persistent inflation concerns and a hawkish pause from the Fed led to an uptick in US Treasury yields in July, however, as growth indicators softened and the Fed signaled a shift toward easing, yields moved lower towards the end of August.

Longer-dated maturities remained under pressure. Investment-grade and high yield spreads experienced some widening in early August on the back of weak labour data but have since retraced some of that and narrowed near historical levels by the end of the month, backed by resilient corporate earnings and growing rate cut expectations.

The US dollar weakened over summer, weighed down by economic growth concerns and fiscal policy uncertainty. Meanwhile, gold extended its strong performance, benefiting from geopolitical risks and market volatility.

Source: BlackRock, as of 15 September 2025.

Conservative, Balanced and Aggressive Portfolios

Performance Commentary

Over June to August, the core models delivered positive absolute performance. On a relative basis, they also outperformed their respective benchmarks, despite a slight lag in August. Overall, models with higher allocations to equities posted stronger returns both in absolute and relative terms.

Broadly speaking, BlackRock’s global equity exposures were significant drivers behind absolute and relative performance over the period. More specifically, maintaining a modest overweight to US equities was a key contributor. The asset class benefited from strong corporate earnings, improved clarity on trade policy, and a dovish shift in the Fed’s tone in August, which reinforced expectations for potential policy easing in September. Their targeted exposures to the information technology sector contributed positively to performance, driven by strong forward-looking earnings and sales growth projections.

Outside the US, allocations to Japanese equities were also additive to performance, driven by easing US trade tensions, with the agreement to reduce the headline US tariff rate to 15%. Elsewhere in emerging markets, Chinese equities were another key contributor. The rally was fueled by the ongoing bilateral negotiation with the US, expectations of additional stimulus by Chinese policy makers, and positive economic data surprises. In BlackRock’s latest rebalance, they added to Japanese equities and turned slightly overweight in emerging markets to diversify their regional exposures, both of which proved additive to performance. 

BlackRock’s fixed income exposures delivered positive absolute performance over the period but modestly detracted on a relative basis. Allocations to US mortgage-backed securities and US Treasuries drove absolute returns supported by expectations of Fed rate cuts. Emerging market debt also positively contributed to performance. On a relative basis, their underweight positions in credits detracted, as markets continue to shift towards a risk-on stance.

BlackRock’s basket of diversifiers continued to support performance, led by their allocation to gold amid persistent geopolitical risks and expectations of lower interest rates. TIPS exposures also contributed positively, as inflation data remained above the Fed’s target despite signs of softening in the labor market.

Source: BlackRock, Morningstar as of 31 August 2025. Performance is based on USD total returns with income reinvested and net of total expense ratios but gross of transaction costs. Past performance does not guarantee future results.

* Inception date for Conservative, Balanced and Aggressive portfolios is 31 Dec 2014.

** Using Bloomberg Global AGG/world equity index until 31 Dec 2017, Bloomberg US Universal/world equity index EUR/GBP hedged to USD after 31 Dec 2017.

Reoptimisation Commentary

Key takeaways

• Leaning further into equities, moving from a 1.5% to 2% overweight, in light of a more supportive policy environment and a reduction in trade-related uncertainties.
• Favouring US and emerging markets equities with exposures funded from European equities which have shown some divergence in corporate earnings relative to other regions.
• Increasing allocation to high yield bonds and emerging market bonds, supported by improving spread momentum.
• Further adding to gold as a portfolio diversifier. A potential Federal Reserve (Fed) rate cut could provide support for the asset class, which also serves as a hedge against market volatility.

Following the initial volatility triggered by US trade-related policies, market sentiment has generally improved over the summer months. Investor attention has since shifted towards the Fed’s monetary policy stance. With signs of softening in the US labor market, the economic deceleration may provide room for more accommodative policy measures, despite inflation remaining somehow elevated.

BlackRock is increasing their equity overweight from 1.5% to 2%, positioning to capture the supportive policy tailwinds while remaining mindful of potential disruptions from policy shifts and geopolitical developments.

Within equities, BlackRock is modestly increasing their allocation to US equities, supported by solid forward-looking earnings relative to other developed markets – especially in the technology sector, where long-term prospects remain compelling to them due to continued progress in artificial intelligence.

BlackRock maintains a constructive view on emerging markets equities, supported by appealing earnings potential and attractive valuations. The additional allocation was primarily funded from European equities, which have shown some divergence in corporate earnings compared to other regions. Elsewhere, they are taking profits from Japanese equities following the recent rally. They prefer adopting a wait-and-see approach ahead of the confirmation of the next Prime Minister and any subsequent changes in fiscal and monetary policy. 

On the fixed income side, BlackRock is modestly increasing duration in anticipation of a more dovish stance from Fed, while still maintaining an overall neutral positioning given ongoing rate volatility. They favour the riskier segments of the asset class, including high yield and emerging markets bonds, supported by improving spread momentum and the added benefit of geographic diversification offered by emerging markets.

BlackRock maintains a basket of diversifiers to achieve returns beyond traditional stocks and bonds. In particular, they are further adding to gold as a potential Fed rate cut could provide support for the asset class, which also serves as a hedge against market volatility. They are maintaining their allocation in inflation-linked bonds as inflation remains more persistent than expected.

Very Aggressive Portfolio

Performance Commentary

The equity model delivered positive performance over the period from June to August in both absolute and relative terms. 

Maintaining a modest overweight to US equities was a key contributor. The asset class benefited from strong corporate earnings, improved clarity on trade policy, and a dovish shift in the Fed’s tone in August, which reinforced expectations for potential policy easing in September. 

In BlackRock’s most recent rebalance, they increased their allocation to the information technology sector, which proved beneficial to performance as the sector continues to be supported by sustained momentum from accelerated AI investment.

Outside the US, allocations to Japanese equities were also additive to performance, driven by easing US trade tensions, with the agreement to reduce the headline US tariff rate to 15%. Elsewhere in emerging markets, Chinese equities were another key contributor. The rally was fueled by the ongoing bilateral negotiation with the US, expectations of additional stimulus by Chinese policy makers, and positive economic data surprises.

In BlackRock’s latest rebalance, they added to Japanese equities and turned slightly overweight in emerging markets to diversify their regional exposures, both of which proved additive to performance.

Source: BlackRock, Morningstar as of 31 August 2025. Performance is based on USD total returns with income reinvested and net of total expense ratios but gross of transaction costs. Past performance does not guarantee future results.

* Inception date for Very Aggressive portfolio is 31 Oct 2016.

** Using Bloomberg Global AGG/world equity index until 31 Dec 2017, Bloomberg US Universal/world equity index EUR/GBP hedged to USD after 31 Dec 2017.

Reoptimisation Commentary

Following the initial volatility triggered by US trade-related policies, market sentiment has generally improved over the summer months. Investor attention has since shifted towards the Fed’s monetary policy stance.

With signs of softening in the US labor market, the economic deceleration may provide room for more accommodative policy measures, despite inflation remaining somehow elevated. BlackRock is modestly increasing their allocation to US equities, supported by solid forward-looking earnings relative to other developed markets – especially in the technology sector, where long-term prospects remain compelling to them due to continued progress in artificial intelligence.

BlackRock maintains a constructive view on emerging markets equities, supported by appealing earnings potential and attractive valuations. The additional allocation was primarily funded from European equities, which have shown some divergence in corporate earnings compared to other regions. Elsewhere, they are taking profits from Japanese equities following the recent rally. They prefer adopting a wait-and-see approach ahead of the confirmation of the next Prime Minister and any subsequent changes in fiscal and monetary policy.

Source: BlackRock, performance commentary as of 31 Aug 2025. Rebalance date is 22 Sep 2025.

This information should not be relied upon as investment advice, research, or a recommendation by BlackRock regarding (i) the iShares Funds, (ii) the use or suitability of the model portfolios or (iii) any security in particular. Only an investor and their financial advisor know enough about their circumstances to make an investment decision. Past performance is not a reliable indicator of future results and should not be the sole factor of consideration when selecting a product or strategy.

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