BlackRock CEO Larry Fink has stated that the market is overpricing the Federal Reserve's multiple rate cuts, given the continued growth of the U.S. economy. Fink said on Tuesday, "I don't think there will be any landing." "The forward rate curve is crazy loose. I do think there's room for further easing, but not as much as the forward curve suggests."
Money markets imply that there is a one-third chance of the Federal Reserve cutting rates by another 50 basis points in November, with expectations for about 190 basis points of rate cuts by the end of next year. However, Fink said that he finds it hard to see this scenario becoming a reality, as most government policies currently have a more inflationary effect than deflationary.
Fink expects the U.S. economy to continue growing at a rate of 2% to 3%. He stated, "Some sectors of the economy are doing very well. We spend too much time focusing on the areas that are not doing well," he said.
In response to increasing risks in the labor market, the Federal Reserve reduced 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.
Federal Reserve Chairman Powell said on Monday that the Federal Reserve will "over time" lower interest rates, emphasizing that the overall U.S. economy remains on solid ground. He also reiterated his confidence that inflation will continue to move towards the 2% target.
Advertisement
The market is betting on a significant rate cut by the Federal Reserve.
Infrastructure Investment
Fink believes that the private sector has enough capital to fund infrastructure investments, which is an important factor in stimulating economic growth. BlackRock, the world's largest asset management company with assets of about $10.6 trillion as of June, has been actively entering infrastructure financing and also developing the lucrative private market asset category.
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 an expanding investment in infrastructure by both the public and private sectors."Fink stated that as the economy expands, corporate earnings will perform well, and despite asset valuations and some geopolitical issues, the market is not facing any real systemic risks. He said that despite the media and experts' discussions about the U.S. election, the U.S. election rarely has a significant impact on assets.
Fink said: "We see this every year, every four years, whenever we have an election, everyone says the market is going to change dramatically, but over time, that's not the case." He added: "I think today, due to the expansion of global capital markets, we are diversifying risks more than ever before."
Leave a Comment