BlackRock’s Larry Fink: the world will be different after this crisis

Some BlackRock clients have used the recent market sell-off as an opportunity to increase their allocation to equities, CEO says

BlackRock’s chief executive Larry Fink has written to shareholders in the $6.8tn asset manager to offer reassurance that the global economy will recover from the coronavirus pandemic — and that some early investment opportunities are already starting to emerge.

Fink, who has written to BlackRock investors in his capacity as chair of the US asset manager, told shareholders that the Covid-19 crisis, which has claimed the lives of more than 35,000 globally, would lead to a shift in the psychology of investors and businesses.

“In my 44 years in finance, I have never experienced anything like this,” Fink told investors in his annual chair’s letter, published on 30 March.

“The outbreak has not simply pressured financial markets and near-term growth: it has sparked a reevaluation of many assumptions about the global economy, such as our infatuation with just-in-time supply chains or our reliance on international air travel.”

He added: “Even more profoundly, people worldwide are fundamentally rethinking the way we work, shop, travel and gather. When we exit this crisis, the world will be different.”

The severe market fallout from Covid-19 has wiped billions of dollars from some of the world’s largest companies — including about $22.5bn from BlackRock’s market capitalisation — as investors contemplate a sharp economic downturn and considerable rise in unemployment levels.

In his 11-page missive, Fink told BlackRock shareholders that despite the problems, the global economy was poised to “recover steadily”.

This crisis, added Fink, does not bear the same characteristics as a “typical financial crisis”. He pointed to early interventions by governments and central banks to help keep businesses afloat and bolster the economy.

“The speed and the shape of these policies are deeply influenced by the world’s experience during the global financial crisis in 2008,” said Fink. “I also believe their actions are likely to be more effective and work more quickly since they are not fighting against the same structural challenges as they were a decade ago.”

Fink added to a growing chorus of investors who are displaying optimism about early investment opportunities emerging from the pandemic. However, he acknowledged it was “impossible to know” whether markets had reached their bottom.

Some BlackRock clients — particularly those with a preference for fixed income — have used the recent market sell-off as an opportunity to increase their allocation to equities, Fink said.

He said: “The world will get through this crisis. The economy will recover. And for those investors who keep their eyes not on the shaky ground at our feet, but on the horizon ahead, there are tremendous opportunities to be had in today’s markets.”

Source: Financial News

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