Bonds have experienced a rough go lately as interest rates have hiked up following last month’s headlines that Federal Reserve Chairman Ben Bernanke may end the quantitative easing program sometime next year. The subsequent spike in 10-year treasury yields prompted a rush of Fed governors to take to the airwaves and explain the intentions of Fed in an effort to soothe markets.
Fink is skeptical of inflation in line with current numbers from Europe and the U.S. that show growth in prices is still below the 2 percent targeted by central banks. He told Bloomberg, “I don’t see any inflationary risk at all.”
Fink sees a steady increase in bond rates over time as a result of what he sees as an improvement in the U.S. labor market and his feeling that “Europe is stable.” As a result of his outlook on bond rates, the Blackrock chief says that as earnings come, equities are likely still the place to be, noting his previous advice to remain fully percent in equities.
“To be 100 percent in equities is the right trade,” Fink said, providing earnings come in similar to Alcoa (NYSE:AA), which beat estimated earnings per share by a penny despite traversing an industry beset with falling prices.
He also seemed generally unconcerned about the tapering of quantitative easing on the markets, suggesting that it was something new and that over time it will “not be as bad as people fear.” He encouraged markets and spectators to monitor the comments of Bernanke rather than pay attention to the Fed president who happens to be in the news on any given day.
Taking a different tone from what Minneapolis Fed president Narayana Kocherlakota suggested, Fink said of Bernanke, “I thought he was very good, very open, very transparent in terms of where the FED Reserve is thinking.” This is in contrast to worries that the Fed has not been clear about its intentions with quantitative easing and with interest rates in general.
Fink declined to be political, saying he would give a potential Hillary Clinton presidency some thought. When asked about President Obama’s performance, Fink replied, “I’m not here to talk about the president, I’m here to talk about the economy.”