June 28 Reuters Shares of AIfocused companies will be a major driver of returns for developed markets in a tough economic environment, BlackRock Investment Institute said, citing a current rally that is concentrated in a handful of technology stocks.

SP 500 gains have become increasingly concentrated in a handful of tech stocks, surpassing levels seen in the 2000s tech boom, BlackRock Investment Institute39;s team wrote in a midyear outlook note.

We think this unusual equity market shows a mega force like AI can be a big driver of returns even when the macro environment is not your friend, it said.

The institute has an overweight allocation for AIrelated shares in developed markets.

It also upgraded longterm government bonds of the euro region and the UK to neutral, and said it preferred shortdated U.S. Treasuries, mortgagebacked securities and highgrade credit.

We think the current pricing of future euro area inflation above future U.S. inflation is unlikely to pan out given more aggressive European Central Bank rate hikes, the institute said, while downgrading the inflationlinked bonds of euro area.

Reporting by Susan Mathew in Bengaluru; Editing by Anil D39;Silva

Source Reuters