BlackRock CEO: The U.S. economy will not "land" - the market's expectations for a rate cut by the Federal Reserve are excessive
BlackRock CEO Fink stated that the U.S. economy continues to grow, and the market's expectations for a rate cut by the Federal Reserve are too high. He believes there will be no economic "landing" and expects the economy to grow at a rate of 2% to 3%. Despite market indications of a rate cut possibility, Fink believes that the inflationary effect of government policies outweighs the deflationary effect, and the rate cut will not be as large as expected by the market. He also mentioned that the private sector has sufficient funds to support infrastructure investment, and corporate profits will remain strong
According to the financial news app Zhitong Finance, BlackRock CEO Larry Fink stated that due to the continuous growth of the U.S. economy, the market's pricing for multiple rate cuts by the Federal Reserve is too high.
Fink stated on Tuesday: "I don't think there will be any landing." "The looseness of the forward rate curve is crazy. I do believe there is further room for easing, but not as much as the forward curve indicates."
The money market suggests that there is a one-third chance of the Fed cutting rates by 50 basis points again in November, with an expected total rate cut of about 190 basis points by the end of next year. However, Fink expressed difficulty in seeing this scenario materialize, as the inflationary effect of most government policies currently outweighs deflationary effects.
Fink expects the U.S. economy to continue growing at a rate of 2% to 3%. He stated, "Some sectors of the economy are performing very well. We have spent too much time focusing on underperforming areas," he said.
With increased risks in the labor market, the Fed lowered borrowing costs by 0.5 percentage points in September to maintain the strong momentum of the U.S. economy. This was the first cut since 2020 and was larger than usual.
Fed Chair Powell stated on Monday that the Fed will "lower rates over time" and emphasized that the overall U.S. economy remains on a solid footing. He also reiterated his confidence in inflation moving towards the 2% target.
Market bets on significant rate cuts by the Fed
Infrastructure Investment
Fink believes that the private sector has enough capital to fund infrastructure investments, which is a key factor in stimulating economic growth. BlackRock, the world's largest asset management company with assets under management of around $10.6 trillion as of June, has been actively involved in infrastructure financing and developing profitable private market asset categories.
He said, "The private sector has enough capital to fund these new projects, so for me, this is the beginning of a new reality where we will see public and private investments in infrastructure continue to expand."
Fink stated that as the economy expands, corporate profits will perform well, despite asset valuations and some geopolitical issues, the market does not face any real systemic risks. He mentioned that despite media and expert discussions on the U.S. elections, the elections rarely have a significant impact on assets.
Fink said, "We see this situation every year, every four years. Every time we have an election, everyone says the market will undergo huge changes, but over time, that's not the case." He added, "I believe today that due to the expansion of global capital markets, we are diversifying risks more than ever before."