- Says markets reacting emotionally to lower oil, China slowdown
- Investors including Soros, Gundlach advise investors to sell
Laurence D. Fink, who runs the world’s largest asset manager, said the recent stock market decline presents a buying opportunity because markets are poised to gain over the course of the next year.
"You can’t walk away from these movements,” Fink, chief executive officer of BlackRock Inc., said Friday in an interview with Erik Schatzker and David Westin from the World Economic Forum in Davos. “Use these as an opportunity."
Fink said while markets have currently capitulated amid slumping oil and inconsistent messages coming from China, he doesn’t expect a bear market in equities. BlackRock, which oversees $4.6 trillion for clients, saw institutional investors starting to come back into markets on Wednesday, when U.S. stocks briefly fell as much as 3.7 percent before recovering most of the losses.
Top investors such as George Soros and Jeffrey Gundlach have advised investors to use short-term market rebounds to sell assets. Soros said yesterday that China’s economy is headed for a hard landing, a slump that will worsen global deflationary pressures, drag down stocks and boost U.S. government bonds. Other investment managers, including Guggenheim Partners’ Scott Minerd and Bridgewater Associates’ Ray Dalio, have warned that the market likely has further to fall.
Soros, who shorted the Standard & Poor’s 500 Index, said it is still too early to buy equities, while Gundlach said he expects a "protracted decline in the S&P 500." Dalio cautioned that global markets face risks to the downside as economies near the end of a long-term debt cycle.
The warnings come as oil prices have plunged and China’s growth has slowed.
Fink said China needs to expand its international markets faster and allow more foreign investors, which would create a more stable, less volatile market, he said. "What China struggles with is an immature capital market that is heavily dependent on leverage retail," he said.
Fink said it would "be horrible" if China devalues its currency because it would have a huge global deflationary impact and would mean the country is moving back to an export-driven economy.
His views diverge from others, including hedge fund manager Mark Hart and Goldman Sachs Group Inc. President Gary Cohn. Hart, who is betting against the yuan, said China should weaken its currency by more than 50 percent this year. A one-off devaluation would ease pressure on China’s foreign exchange reserves and remove an incentive for capital outflows, he said. Cohn said that China will likely have to devalue its currency in the next six months to address slowing growth.