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

BlackRock Inc.’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.”

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.

Before it's here, it's on the Bloomberg Terminal.