- BlackRock recently released its 2025 outlook.
- The asset manager cites Bitcoin as a "new diversifier."
- BlackRock also said AI infrastructure spending could hit $700B by 2030.
Traditional portfolio building is evolving.
BlackRock (NYSE:BLK) recently released its 2025 outlook for markets and the economy and Bitcoin was a key theme.
Specifically, experts from the world’s largest asset manager discussed the need for “new diversifiers” and one of them is Bitcoin.
The tried-and-true diversifier over the years, bonds, could use some competition, BlackRock said in its outlook.
“The erratic correlation between stock and bond returns has defined the new regime – and government bonds have become a less reliable cushion against equity selloffs as a result,” experts wrote in the outlook. “We see the potential for other diversifiers, old like gold and new like bitcoin, to step in.”
They said it is not about replacing long-term bonds to find diversification. Rather, they said it is about seeking new and different sources of risk and return.
Bitcoin ETF Growth: “Never Seen Anything Like It”
BlackRock said that Bitcoin’s potential as a “new diversifier” stems from its potential to appreciate over time due to its growing demand, which is in part based on Bitcoin’s likelihood of becoming more widely used as a payment technology.
“Bitcoin’s role as a store of value and payments system make it a potential diversifier,” Samara Cohen, chief investment officer of ETFs and index investments at BlackRock, said.
BlackRock is certainly aware of Bitcoin’s growing demand, as its iShares Bitcoin Trust (NASDAQ:IBIT) has been the fastest growing ETF ever. In less than a year it has amassed more than $53 billion in assets under management, surpassing the $50 billion barrier faster than any other ETF.
“I wasn’t sure we’d ever see it, but I’ve never seen anything like it in my career for something to go from 0 to $50 billion in basically six months,” BlackRock CFO Martin Small said earlier this month at the Goldman Sachs U.S. Financial Services conference.
Further, the prospects of greater adoption increased when Donald Trump was elected U.S. president, as he is expected to be a champion for Bitcoin and cryptocurrency.
“Those distinct drivers should make it less correlated with stocks and other risk assets in the long term. The correlation between bitcoin and equity returns has typically been low in the short history we have – even with the occasional spike,” BlackRock officials wrote in the 2025 outlook.
And if it does achieve broad adoption, Bitcoin’s risk and return profile would change, becoming, perhaps more suited as a tactical hedge against some equity risks, similar to gold.
A Different Approach to Portfolio Building
Blackrock officials also discussed how portfolio building is evolving, away from the neutral benchmark construction of 60% stocks and 40% bonds, or the like.
“Financial markets themselves are also being reshaped as some sectors grow rapidly and others fade, changing the composition of benchmark indexes,” BlackRock experts wrote. “The S&P 500 looks very different from just five years ago, with far more concentration.”
Thus, they think investors should rely less on broad asset classes and seek out thematic opportunities that are transforming the economy, like AI, or look to international stocks or private markets, for example.
This more tactical approach, however, may require investors to seek out actively managed strategies, which should provide an advantage in this environment.
AI is another big theme in the outlook. BlackRock experts outline three phases of AI: build-out, adoption, and transformation. Currently, we are still in the build-out phase. They estimate that spending on AI infrastructure could top $700 billion by 2030, which is equivalent to 2% of U.S. GDP.
“AI has the potential to become a bigger revenue pool than search
and cloud,” Raffaele Savi, global head of systematic investing at BlackRock, said