(Yicai) July 11 -- Two “immutable laws” prevent the United States government from taking extreme actions, which actually makes capital markets more willing to place bets, said Li Wei, Blackrock global chief investment strategist in an exclusive interview with Yicai this week.

These two considerations are “number one, considerations for US debt dynamics; and number two, the intricate nature of the global supply chain,” Li noted.

And given the rapid development of artificial intelligence, New York-based BlackRock continues to be overweight US stocks and the tech sector to gain AI-related exposure, she added.

Regarding US efforts to wield tariffs to improve its balance of payments, Li said the country could crimp foreign appetite for US Treasury bonds, thereby raising interest payment pressures amid growing fiscal deficits.

This presents a problem, as the “One Big Beautiful Bill” recently signed into law by US President Donald Trump risks driving up the government’s deficit, so increasing the country’s reliance on foreign investors buying its bonds.

Li also cautioned that there could be serious repercussions from US disruption of global supply chains. "The global supply chain that took decades to build is not going to be ripped apart from one day to the next without grave consequences,” she said. “I'm not just talking about higher inflation. I'm talking about access to critical goods, rare earths being one example.”

The US dollar has depreciated nearly 10 percent against the euro since the start of the year because of US policy uncertainty, tariff conflicts, and debt sustainability concerns. But a weaker greenback tends to boost the earnings power of America’s tech giants and thus supports their stock prices, Li noted.

On European equities, Li said there had been doubts about the sustainability of the recent market rally, as there is still a lack of fundamental support. Investor expectations are partly driven by emotion, she noted, especially amid the current highly sentiment-driven policy environment.

Historical experience shows that for European markets to consistently outperform the US, two key conditions must be met: first, European corporate earnings growth must exceed that of the US, and second, Eurozone economic data must consistently beat market expectations and outperform the US.

Though European equities momentarily outperformed earlier this year, neither condition was met, which is why BlackRock chose not to chase European assets at that time.

Meanwhile, the world's largest asset manager plans to maintain a neutral allocation to Chinese stocks over the next six to 12 months, according to the US firm’s global chief investment strategist.

This neutral stance reflects several interwoven factors. Technological breakthroughs in certain areas have provided a temporary boost to market sentiment, while expectations for regulatory easing and economic stimulus have lent support to risk assets, she said.

China’s real estate sector, inflation situation, and demographic changes remain the most closely watched long-term variables, Li added.

Over a longer horizon, she pointed out that sustained inflows of international capital cannot rely solely on attractive valuations, they require solid fundamental drivers. As a result, BlackRock prefers a structural allocation approach, increasing exposure to sectors with clear policy support and strong fundamentals, such as technology and healthcare, Li said.

Editor: Tom Litting