BlackRock sees prospects in AI, but US debt overshadows the 2025 forecast

BlackRock anticipates the rise of artificial intelligence (AI) to continue to propel US stocks next year and promote overall economic growth, but rising US government debt levels may jeopardize its positive 2025 prediction.

AI innovations are expected to benefit US stocks more than European peers, while private markets will increasingly play a vital role in funding AI-related infrastructure, according to the BlackRock Investment Institute, the world’s largest asset manager’s research arm, on Wednesday.

Although US economic growth may slow slightly next year, the Fed is unlikely to be able to considerably reduce interest rates as inflation stays stable and above the central bank’s objective, according to the institute. It does not expect interest rates to fall below 4%, from their current range of 4.5-4.75%.

Continued price pressures from geopolitical fragmentation and infrastructure expenditure may weigh on the bond market.