Even the world’s biggest money manager, BlackRock (NYSE: BLK), is sounding a note of caution about the US stock market right now.

This cautious view comes as the stock market is trying to bounce back after a sharp drop on April 4th, triggered by trade tariff worries. As of now, the S&P 500 benchmark index has climbed back up by 2.5%.

However, despite this positive movement, the BlackRock Investment Institute, headed by Jean Boivin, points out that their cautious stance is due to growing uncertainty around government policies. They believe this policy uncertainty could slow down economic growth and put pressure on stock prices.

In their own words, Jean Boivin explained, “We’re becoming more careful in the short term, looking at the next three months. <…> Policy uncertainty could hurt both growth and stocks soon – and the longer this uncertainty hangs around, the more harm it could do.” 

Because of these concerns, BlackRock has adjusted its investment strategy, shifting its recommendation for US stocks from ‘Overweight’ to ‘Neutral’ for the next three months. This change basically means they’re reducing their risk in the face of all this market uncertainty.

Further elaborating on this cautious approach, BlackRock analysts noted, “We’re feeling uneasy about the coming three months. <…> Focusing on the short-term reinforces our earlier expectation that riskier investments might remain under pressure until this cloud of uncertainty starts to lift.”

Room for recovery 

As part of this updated strategy, BlackRock is also pulling back a bit from Chinese stocks and leaning more into safer assets like short-term US Treasury bonds. Boivin suggests these government bonds are a safer bet when market turbulence is expected.

However, it’s not all gloom and doom. BlackRock still has a positive long-term outlook on US stocks. They believe that, in the long run, the US market can regain its position as a global leader, driven by strong trends like the ongoing progress in artificial intelligence (AI).

Interestingly, even before this cautious outlook from BlackRock, CEO Larry Fink had already suggested on April 7th that the stock market could potentially drop by as much as 20%. His concern? The possibility of an economic contraction.

However, Fink also pointed out a silver lining, suggesting that any downturn should be seen as a good opportunity to buy stocks, anticipating an eventual market rebound.

Adding to the cautious voices, banking giant Goldman Sachs has also expressed concerns about the stock market. They even warned that the recent sell-off could turn into a longer-term bear market due to increasing risks of a recession – which Goldman Sachs currently estimates at a 45% probability.

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