Stocks may still return more than 7 percent in the long-term, assuming the global economy expands at about 4 percent, Fink said today at the DealBook conference in New York. Ray Dalio, founder of Bridgewater Associates LP, said at the conference earlier today that equity returns will slow to 4 percent annually in the next decade.
Fink, whose New York-based firm is the world’s largest money manager, with $4.1 trillion in assets, said last year he would invest all of his personal wealth in equities. He’s tempered that optimism this year following political stalemates, saying in January he had lowered his expectations for the stock market in the first quarter after being disappointed by the bill U.S. lawmakers passed to avert spending cuts and tax increases. Last month, he said the U.S. could have a lower equity market following the political debate on the debt ceiling.
Today, Fink said if investors are already invested 100 percent in equities, they should keep their money there. He has said in the past he’s bullish on the U.S. over the longer term, citing a strong banking system, an improving housing market and the nation’s large supply of natural gas.
U.S. stocks have gained about 25 percent annually, including dividends, since reaching a 2009 low as the U.S. Federal Reserve kept interest rates near zero and inflated asset prices with a series of unprecedented bond purchases.
The Fed won’t be able to raise interest rates for a number of years as the economy hasn’t strengthened sufficiently, Dalio said today. Dalio, whose $150 billion hedge-fund firm is based in Westport, Connecticut, didn’t elaborate on his forecast for equities.
Fink joined Dalio in pointing to France as a potential trigger for problems in the euro region. Fink, who called France “structurally uncompetitive” last year, said today that country may be the cause for an eventual failure of the euro currency.
Dalio said today the next major financial crisis will come from France because of a rise in debt-service payments that will have a “constrictive nature” on the economy. He said France’s debt will be difficult to roll over, resulting in funding gaps and wider credit spreads that will make the debt-service payments more difficult.
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