Photo via Fortune
On Tuesday, Rob Kapito, the president of BlackRock Inc., said that there is a “high probability” that global stocks are going to increase savings amounting to more than $70 trillion (£52.1 trillion) enters the market in search of better returns.
At a question-and-answer session in New York, Kapito said that cash is also possible to enter the debt market over the long term, maintaining low-interest rates.
Gravity-defying equities and high-priced, low-yielding bonds in the United States have shocked many investors who predicted that either or both markets would eventually short-circuit. Stocks in the United States have been in a bull market constantly for the better part of a decade, while the yield of the benchmark 10-year U.S. note has not surpassed 2.65 percent in three years.
Every trend has helped BlackRock bring money into low-fee “passive” funds that follow the market and drew tens of billions of dollars from investors in 2017. BlackRock is the largest fund manager in the world, overseeing almost $6 trillion.
The remarks of Kapito that are anticipating more of the same – high stock prices and low bond yields – echo those that he has made at events of investors in recent years.
He said that companies that are reluctant to invest in their businesses have been putting money into dividend payouts and share repurchases, while private companies have been hesitant to go public.
According to Kapito, that has conspired to reduce the amount of stock that is available in the market, while central banks that are reckoning with the financial crisis have driven bond yields lower.
Kapito said: “You may not want to hear this, but there’s not enough stock to buy, and there’s not enough bonds that have any yield to buy.”
He also added that investors are eventually going to get tired of earning little to nothing on their cash and will transfer that money into capital markets.
He continued: “There’s a high probability that stocks across the globe are going to rise.”