The world’s biggest investment manager just changed its view on Australian shares

This week we had session with BlackRock.

You may not know the name.

But there’s a very good chance you have money connected to them.

BlackRock is the world’s largest investment manager, with around $15 trillion under management.

And one part of their latest thinking caught my attention.

They are reducing (trimming) Australian equities and increasing their allocation to international equities because they see a more favourable outlook relative to Australian equities.

That doesn't mean they are saying “sell Australia”.

In fact, quite the opposite.

It got me thinking about how different the investment world looks today compared with even five years ago.

Because there are some pretty big forces changing where future growth might come from.

Take the last 12 months.

The S&P 500 (US) is up around 17%.

The NASDAQ (US) is up around 20%

The ASX 200 (AUS) is flat at 1%.

Or BITCOIN is down 32%…

That is a pretty big difference.

And even for an Australian investor, where currency movements matter, the difference has still been meaningful.

An unhedged investment in the S&P 500 would have been roughly 7% higher in Australian dollar terms over that period before dividends, based on the movement in the AUD/USD exchange rate.

So why does this matter?

Because we often see the same thing with new clients.

They own Australian shares.

Lots of them.

CBA.

BHP.

Westpac.

NAB.

Telstra.

Maybe a few others.

And there is nothing wrong with that.

Australian companies can be fantastic investments.

Our banks are highly profitable.

Our resources companies are some of the biggest and most important commodity producers in the world.

And for retirees, Australian shares can provide attractive dividend income and franking credits.

But there is a risk.

We can become comfortable investing in what we know.

And that can create a home bias.

Because Australia is only a small part of the global investment market.

There are thousands of businesses outside Australia doing some pretty incredible things.

AI.

Data centres.

Robotics.

Semiconductors.

Healthcare.

Software.

Energy infrastructure.

And this brings me to another theme we are seeing consistently.

The potential commodity supercycle.

Think about what is required to build the next generation of technology.

Every new data centre needs enormous amounts of electricity.

Electricity requires infrastructure.

Infrastructure requires copper, aluminium, steel and other raw materials.

AI requires semiconductors.

Semiconductors require enormous amounts of manufacturing capacity and specialised materials.

Memory demand is exploding as AI systems become more powerful.

And robotics is moving from science fiction into factories, warehouses and eventually our everyday lives.

We are already seeing signs of this demand.

AI data centres are putting pressure on electricity supply, while the semiconductor industry is experiencing major demand for memory and other components.

And this is where Australia becomes interesting again.

Because we are sitting on a lot of the stuff the world needs.

Iron ore.

Copper.

Lithium.

Uranium.

Gold.

Aluminium inputs.

And other critical minerals.

And personally, I’d much rather see Australia do more than simply dig these commodities out of the ground and ship them overseas.

I’d love to see us use more of our own resources here in Australia.

Build the processing plants.

Manufacture the products.

Create the technology.

Create the jobs.

Capture more of the value before it leaves our shores.

The opportunity is enormous.

I just don’t have a lot of confidence that our current leaders have the long-term vision, policy and execution to make that happen at the scale I think is possible.

And that’s another reason I don’t want to make a big investment bet on Australia alone.

We can believe in Australia’s potential while still diversifying globally.

So I don't see this as a simple argument for “Australia versus international”.

I see it as a reason to make sure we have exposure to both.

International markets give us access to different companies, industries and sources of growth.

Australia gives us exposure to financials, resources, income and potentially the enormous amount of commodities the world will need to build the next generation of technology.

That is what diversification is really about.

Not trying to pick the one country that will win.

Not trying to guess which market will perform best next year.

And definitely not selling everything because one investment manager changed an allocation.

It is about making sure your portfolio isn't relying on one country, one industry or one economic story to get you where you want to go.

BlackRock's change in allocation is simply another piece of information we consider when we're looking at the bigger picture.

Because nobody knows what will perform best over the next 10 or 20 years.

Not me.

Not BlackRock.

Not anyone.

Our job is to build portfolios that don't need us to know.

And that's ultimately the lesson.

Don't invest based on what feels familiar.

Invest based on what gives you the best chance of achieving your goals.

And sometimes that means looking beyond Australia.

Sometimes it means finding opportunities within Australia that the rest of the world needs.

And sometimes it means doing both.

If you'd like a quick conversation about how your investments are actually positioned, book a free discovery session.

No forms.

No jargon.

Just a conversation.

Reading is helpful. Having a plan is better.

Book your free 30-minute Discovery Session and let’s build a strategy that fits your life.

7Wealth Pty Ltd ABN 44609210246 is a Corporate Authorised Representatives and is authorised throughCobalt AdvisersPty Ltd ABN 64 628 654 099 who is an Australian Financial Services Licensee 512550. 7Wealth Pty Ltd is a Credit Representative ofAustralian Finance GroupLtd ABN 11 066 385 822 (AFG) Australian Credit Licence 389087.
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