Are the lessons of 2008 long forgotten? The case could be made, judging from BlackRock CEO Larry Fink’s latest advice.
Fink told Bloomberg Television from Hong Kong that investors should have 100% of investments in equities due to low valuations and higher returns than bonds.
“Investors who seek the safety of treasury bonds will have minimal returns and will not be able to meet their needs as the Federal Reserve is expected to keep interest rates low,” Fink told the news service Wednesday. By contrast, equities are trading at the lowest valuations in 20 or 30 years.
“I don’t have a view that the world is going to fall apart, so you need to take on more risk,” he said. “You need to overcome all this noise. When you look at dividend returns on equities versus bond yields, to me it’s a pretty easy decision to be heavily in equities.”
Fink’s recommendation is at odds with investment-management guidelines that urge investors to diversify their holdings by putting 60% of their money in stocks and 40% in bonds, Bloomberg understatedly notes.
“I’m very bullish on the market,” he said, citing the increased liquidity from the U.S. and European central banks. “I think the market is focusing too much on noise like Greece. And yet we’re going to have a lot of volatility and we’re going to have to live with it.”
The European Central Bank would be able to provide liquidity to stabilize the European markets this year, Fink said. In the U.S., he doesn’t see another round of quantitative easing for at least a year.
Asked by Bloomberg if he would become the next Treasury secretary should President Barack Obama win re-election, Fink said: “A, it’s eight months, nine months away; we have to see if the president will be re-elected. B, we’re going to see if the president would want me. And C, I have to ask my wife would she ever let me. Put those all together, I would say it’s pretty foggy, uncertain if that would ever happen.”