BlackRock’s Fink Says He’s Disappointed With Budget Deal

Jan. 2 (Bloomberg) -- Bloomberg's Al Hunt and Bloomberg View Columnist Josh Barro grade the fiscal cliff deal. Blackrock CEO Larry Fink also speaks on Bloomberg Television's "Market Makers." (Source: Bloomberg)

BlackRock Inc. (BLK)’s Laurence D. Fink, who heads the world’s largest asset manager, tempered his optimism for the stock market in the first quarter after saying he’s disappointed by the bill U.S. lawmakers passed to avert spending cuts and tax increases.

“I look at this as a very bad warning sign,” Fink, chief executive officer of BlackRock, said during an interview today with Erik Schatzker and Scarlet Fu on Bloomberg Television’s “Market Makers.” He said he would buy bonds, while being more cautious on equities in the short-term.

Fink, whose firm oversees $3.7 trillion in assets, lowered his expectations for stocks in the first three months of the year because he doesn’t think the U.S. deal addresses the budget deficit. He continues to be bullish on the U.S. economy and equities over a longer cycle because of a relatively strong banking system, an improved housing market and a large supply of natural gas that will create jobs. Fink said the U.S. economy will expand less than 1 percent in the first quarter and may grow at about 2 percent in 2013.

“Despite my pessimism in the short term about equities, I believe the only place to be is in equities, long term,” Fink said. “I am just a little bit more cautious today.”

Photographer: Kiyoshi Ota/Bloomberg

BlackRock Inc. Chief Executive Officer Laurence D. Fink said, "We have the threat of going into a recession in the first quarter." Close

BlackRock Inc. Chief Executive Officer Laurence D. Fink said, "We have the threat of... Read More

Close
Open
Photographer: Kiyoshi Ota/Bloomberg

BlackRock Inc. Chief Executive Officer Laurence D. Fink said, "We have the threat of going into a recession in the first quarter."

Branding Campaign

BlackRock started a five-year branding campaign last year as it seeks to get investors back into higher-yielding assets such as stocks. Fink and other BlackRock executives have said that clients need to diversify and can be harmed by staying in cash-like products. Fink said today the budget deal will keep CEOs and investors sitting in cash, without any impetus to invest. He said he expects stocks to return 8 percent to 10 percent in 2013.

Fink also said banks are under earnings pressure and have to be more aggressive in lending this year as well as cut costs.

The agreement forged by the White House and Senate and approved by the House of Representatives last night permanently reinstates the income tax cuts for more than 99 percent of households, continues expanded unemployment benefits and delays automatic spending cuts for two months. It would let a two- percentage-point payroll tax cut expire.

The package isn’t the grand bargain on deficit reduction that lawmakers wanted when they created the tax-and-spending deadlines over the past three years. It is only one step toward curbing the federal deficit, an issue that will return in February over raising the $16.4 trillion debt limit.

“It’s confidence debilitating, not confidence enhancing, and that’s what we needed to really inspire growth in the economy,” Fink said.

To contact the reporters on this story: Alexis Leondis in New York at aleondis@bloomberg.net; Erik Schatzker in New York at eschatzker@bloomberg.net; Scarlet Fu in New York at scarfu@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.