BlackRock strategists detect anomalies in the markets and warn: "This is not just another cycle, but an economic transformation with an unknown end".

A prolonged and painful hangover from the great financial crisis, a pandemic that paralyzed the entire world, a war in Ukraine that has had energy consequences on a global scale and now... Donald Trump is back in the White House. The sequence is dizzying and may help to understand the ups and downs that the markets have experienced and continue to experience. However, behind the back-and-forth of headlines, something bigger seems to be 'cooking', warn strategists at the BlackRock investment institute. As the research forerunner of the world's largest asset manager, managing more than $11 trillion in assets under management, according to 2025 data, their warning should not fall on deaf ears.

"Several market anomalies this year reinforce our conviction that this is not just another economic cycle, but an economic transformation with an unknown ending," notes the BlackRock Investment Institute (BII) team of strategists led by chief strategist Wei Li in its latest weekly report. The one these analysts highlight the most is in US debt, the most closely watched in the world. Yields on 30-year US Treasuries have risen even as yields on two-year Treasuries have fallen, an unusual situation that reflects investors' desire for higher compensation for holding longer-term bonds.

The easy thing to do, these analysts argue, is to 'blame it' on more media events, such as the trade war in recent months. However, although trade uncertainty reached record highs and markets were very choppy in April, this did not translate into sustained volatility. In fact, implied bond and equity volatility fell to multi-year lows, according to data from Bank of America (BofA). "Markets have largely ignored the tariffs: although they are higher than they were at the beginning of the year, they are now much lower than markets initially feared," Li and his emphasize.

These twists and turns, they argue, show how important it is to "look beyond the noise and use a framework to understand the bigger picture." From what has happened so far in 2025, BlackRock strategists have learned three lessons for the rest of the year that they list in their weekly report.

The first is that, amid all the noise, it has paid to rely on the "immutable economic laws" that keep the world from changing rapidly, they claim: "That allowed us to take advantage of tactical opportunities created by shifts in sentiment as markets tried to deduce what short-term data meant for the trajectory of the economy."

One example linked precisely to tariffs: stocks fell and yields soared after April 2 (Liberation Day), but the manager's research department was confident that immutable laws-such as that US debt sustainability depends on stable foreign funding-would prevent the proposed maximalist stance on tariffs, so they quickly took on risk again before sentiment improved.

Another example: European stocks outperformed U.S. stocks for much of the first half of the year as markets questioned the long-term attractiveness of U.S. assets. "We recognized that the global financial order could not be reconfigured quickly, and U.S. stocks have now recovered. Betting on these changes has been one of the best-performing tactical strategies in 2025," they boast.

The second lesson is that exposure to megatrends, as they define them, should be thoughtful, not indiscriminate. And the clearest example is the fervor around Artificial Intelligence: "We believe megatrends like AI will be key drivers of profitability, but taking advantage of them requires constant monitoring of their evolution and the markets that have priced them in."

In their more thoughtful analysis of AI, the BII identifies three phases, with the first at the current time: development, adoption and transformation: "The huge spending on AI is driving investment opportunities in the build phase, but the opportunities will be different in the last two phases, which may take time to arrive, if they arrive at all. This uncertainty requires adaptability to incoming information." Li's team stresses, for example, the need to re-evaluate technology investment in the US after China's apparently more efficient DeepSeek model led to a drop in technology stocks.

The third and no less important lesson is that reliable diversifiers are scarcer in a changing world. As demonstrated, they stress, investors can no longer rely on long-term U.S. Treasuries to provide protection during massive equity sell-offs.

The anomalies referred to above are telling for these analysts: "Yield movements have broken with pre-pandemic norms as fiscal concerns have increased, with 30-year US Treasury yields rising and two-year yields falling, reinforcing our preference for short-term Treasuries. Global yields reflect this pattern, although the weaker dollar provides some cushion for U.S. investors."

On the other hand, they continue, gold has soared as investors look for other ways to build resilient portfolios. In fact, they note, foreign central banks now hold more gold than U.S. Treasuries, according to Bloomberg data. "We believe bitcoin, hedge fund strategies and private assets can also provide diversification," Li and his team rivet.

By way of summary, the BlackRock report concludes, "the world cannot change overnight, but confidence can. Megatrends require constant monitoring. And investors must find new sources of resilience as diversification options become scarcer."