(Oct 1): BlackRock Inc chief executive officer Larry Fink said the market is pricing in too many interest-rate cuts from the Federal Reserve (Fed), given that the US economy continues to grow.
“I don’t see any landing,” Fink told Bloomberg Television’s Francine Lacqua in an interview on Tuesday on the sidelines of the Berlin Global Dialogue 2024 conference. “The amount of easing that’s in the forward curve is crazy. I do believe there’s room for easing more, but not as much as the forward curve would indicate.”
Money markets imply a one-in-three chance the Fed will deliver another half-point cut in November, and price in a total of about 190 basis points of easing by the end of next year. But Fink said it’s hard for him to see that materialising, as most government policies at the moment are more inflationary than deflationary.
Fink expects the US economy to continue to grow at a 2% to 3% pace. “There are segments of the economy that are doing really well. We spend so much time focusing on the segments that are doing poorly,” he said.
The Fed lowered borrowing costs by a half percentage point in September to preserve the strength of the US economy as risks to the labour market mount. It was the first reduction since 2020 and a larger-than-usual move.
Fed chair Jerome Powell said on Monday the central bank will lower interest rates “over time”, and emphasised that the overall US economy remains on solid footing. He also reiterated his confidence that inflation will continue moving towards the 2% target.
Infrastructure investment
Fink sees enough capital in the private sector to fund investments in infrastructure, which is a major component to help stimulate economic growth. BlackRock, the world’s largest asset manager with about US$10.6 trillion (RM44.1 trillion) in assets as of June, has been pushing aggressively into infrastructure financing as it also grows the lucrative asset class of private markets.
“There is enough capital in the private sector that we will be able to fund these new projects, and so to me, this is the dawning of the new reality that we are going to see broadening of public and private investment in infrastructure,” he said.
As the economy expands, Fink said corporate earnings will do well and despite assets valuations and some geopolitical issues, the market isn’t facing any real systemic risk. He said US elections seldom make a major impact on assets, despite all the noise from the media and pundits around the topic.
“We see repeatedly every year, every four years, when we have an election, everyone says that it is going to have a dramatic change in the market, and over time it doesn’t,” Fink said. “I would argue today that because of the expansion of global capital markets, we are diffusing more risk than ever,” he added.
China ties
The executive said Western companies should be reassessing their ties to China, in light of its support for the Russian economy. BlackRock was the first foreign firm to start a wholly owned mutual fund business in China three years ago, and has faced a probe by US lawmakers for some of its investments in the country.
“Russia’s biggest supporter and the fundamental supporter of the Russian economy is China. And that has to be at least discussed,” he said. “I am not here to make any judgements, but I don’t believe there has been enough assessment.”
Fink also urged Europe to continue unifying its banking market, but stopped short of commenting on a potential combination of Commerzbank AG and UniCredit SpA. BlackRock is UniCredit’s largest and Commerzbank’s third-largest investor.
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