Some financial sector leaders highlight that, despite the current uncertainty, some key factors will drive the stock market in the coming years, while higher interest rates may not have the expected impact on the US economy.
Some big names spoke this Tuesday in Saudi Arabia. It was the Future Investment Initiatives Institute, run by Saudi Arabia’s sovereign wealth fund, the Public Investment Fund, with $925 billion in assets under management, hosting a tribute seven years after the murder of Jamal Khashoggi.
A portion of that $925 billion is parked in BlackRock, which at the beginning of the year established an investment division based in Riyadh. so it was not surprising that BlackRock CEO Larry Fink was among the speakers.
Fink talked about the amount of capital needed to digitize and decarbonize. He pointed to Walmart as an example of a company that uses artificial intelligence to manage its retail space.
‘There are $9 trillion in money markets. In addition to the tremendous need to build this infrastructure, it’s just going to be a booming investment, and I really think this is going to drive the stock market for years to come,’ he said. It’s true, he commented, that price-earnings ratios are at ‘extreme’ levels. But maybe not so extreme. ‘We’re seeing earnings catch up to P/Es,’ he said.
Another point Fink raised was that the notion that higher interest rates will slow the U.S. economy may no longer be true. ‘I think the playbook that higher interest rates can slow an economy needs to be reconsidered given our aging population,’ Fink said, as older people save more money.
What else the BlackRock guru said
He also noted that since the overwhelming percentage of Americans who own homes have 30-year fixed-rate mortgages, the transmission of higher interest rates takes many more years.
Larry Fink
Another big name, Citadel CEO Ken Griffin, said reduced uncertainty after the election will boost markets. ‘The reduction of uncertainty is almost always positive for asset prices, and we are at that moment of maximum uncertainty in a race that Trump has in his favor, but it is almost a coin toss, so I would say that after the elections, we will generally see a positive risk environment as people adapt and adopt a new regime, whether it is a Harris regime or a Trump regime, this uncertainty will be behind us.'”
Source: Ambito
