BlackRock’s Fink Sees Stock Rally Continuing on Low Rates

BlackRock Inc.’s Laurence D. Fink, chief executive officer of the world’s largest asset manager, said the rally in equities will continue next year although it will be more muted than in years past.

Stock market returns will moderate to a range of 6 percent to 8 percent, from more than 10 percent in the past few years, Fink said in an interview with Bloomberg Television’s Erik Schatzker recorded Dec. 5. Still, short-term interest rates will increase to 1 percent or 1.25 percent when the Federal Reserve starts raising them next year, a level low enough to support an increase in the stock market, he said.

As interest rates climb slowly and global central banks continue to be accommodative, “that’s going to be very supportive for the equity markets,” Fink said.

Fink, whose firm manages $4.5 trillion in assets, has called the October selloff in stocks a necessary correction, and says regulators need to apply more pressure to push bond markets toward electronic trading platforms to improve stability. He forecasts a slow increase in interest rates, which will push the U.S. dollar higher and limit room for the Fed to change its policies.

“Possibly bonds are going to be range-bound, but I still believe with a lot of volatility like we saw in October,” Fink said.

There’s a 20 percent chance “the economy does even better” and yields on 10-year government notes reach between 2.5 percent and 3 percent, he said.

Withstanding Volatility

BlackRock’s outlook for 2015, released today, focuses on diverging economies and central bank policies, underscoring the need for investors to evaluate their own risk tolerances, according to Peter Fisher, senior director at the BlackRock Investment Institute.

“Our recommendation isn’t that investors should take risk off the table,” Fisher said in a media briefing today. “You may want to do that if you don’t have the intestinal fortitude to withstand the volatility.”

Oil markets, down about 37 percent this year, are in a process of price discovery that may result in a “new normal” price of $80 to $90 a barrel, from the “old normal” of $100 a barrel, Fink said. Lower oil prices are a “Christmas present” for the American consumer, he said in a Bloomberg Television interview Oct. 21.

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