BlackRock’s Kapito Recommends Real Assets Over Stocks

BlackRock Inc.’s President Robert Kapito said investors should buy assets such as real estate and infrastructure funds as U.S. stocks have hit record levels.

Investors can’t get sufficient diversification from stocks and bonds because the two asset classes are moving increasingly in tandem, Kapito said in a Bloomberg Television interview today with Erik Schatzker.

“Stock prices are more about momentum” and have been fueled by stock buybacks more than revenue, Kapito said. “We want people to get into the market but in a much more diversified way.”

BlackRock, the world’s biggest money manager, today released its 2014 investment outlook, predicting that global stocks will climb in the coming year. There is a 55 percent chance of “tepid” economic growth in 2014 with developed economies expected to accelerate in tandem for the first time since 2010, the New York-based firm said in the report. U.S. growth will reach 2.5 percent, BlackRock (BLK) estimated.

The Standard & Poor’s 500 Index of U.S. stocks advanced 0.3 percent to an all-time high of 1809.80 at 10:55 a.m. in New York, amid confidence that the global economy can withstand a cut in stimulus from the U.S. Federal Reserve. The gauge has jumped 27 percent this year, heading for its biggest annual gain since 1997.

‘Frothy’ Markets

BlackRock’s Chief Investment Strategist Russ Koesterich said stocks in Europe offer better value for investors than equities in the U.S. Parts of the U.S. market are “frothy,” while companies in Europe are still reasonably priced, Koesterich said at an investment conference in New York hosted by the world’s largest money manager.

BlackRock forecast in its outlook that the Federal Reserve will decrease its stimulus-oriented bond purchases “lightly” while keeping interest rates low.

“Tapering aside, 2014 will still be the second-most accommodative year in U.S. monetary history, after 2013,” BlackRock said in the report.

The ability of central banks to stimulate further growth through loose monetary policies has waned, the company said.

“Monetary growth does not address skill mismatches, aging populations, labor market red tape and protectionist policies,” BlackRock said. “Central banks can ease some of the pain -- but ultimately policymakers must deliver structural reforms to boost growth.”

To contact the reporter on this story: Christopher Condon in Boston at ccondon4@bloomberg.net

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

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