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Economy will recover, take a deep breath and have a long-term perspective, says Larry Fink

This is not a financial crisis, but a crisis of confidence, says the BlackRock CEO.

April 02, 2020 / 12:21 PM IST
Larry Fink, CEO, BlackRock Financial Management | October 2017 | “Bitcoin just shows you how much demand for money laundering there is in the world.” (Reuters)

Larry Fink, CEO, BlackRock Financial Management | October 2017 | “Bitcoin just shows you how much demand for money laundering there is in the world.” (Reuters)

BlackRock chief executive Larry Fink has said the US economy will recover from the coronavirus pandemic which would likely be brought under control in three to four months in that country.

In his annual letter to shareholders, the CEO of the world’s biggest asset manager said, "If we look to China as a barometer, they were able to mitigate the pandemic by closing down their economy quite severely, and it took them about 10 weeks to recover."

"It is much harder to completely shut down democratic economies in comparison to autocracies. That’s why I’m suggesting it will take the US 3-4 months to stop infection rates."

Fink said central banks were moving quickly to address problems in credit markets and governments were acting aggressively to enact a fiscal stimulus. The fact that the markets have continued to fall despite these measures suggested that it was a crisis of confidence and not a financial crisis, the 67-year-old said.

Fink, who said he hadn’t seen anything like it in his 44 years in finance, urged shareholders to not "run away from the world of investing," rather take "a deep breath, have a long-term perspective".

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The BlackRock CEO did say that the outbreak would extract a toll on human life, markets and businesses and would reshape investor psychology, business practices and consumer habits.

"One thing that’s fair to say – I don’t see how movie theatres ever come back. I think we’re going to see real pressure on commercial real estate as well since more and more companies are finding that WFH is a functioning way of working, especially with technologies like Aladdin, single platform, video conference etc."

People would hopefully realise the need to save money, invest long term. “This could be a great outcome. A personal safety net is imperative,” he said.

The pain in the market could continue but there were good opportunities as well, Fink said.

"Markets can still fall from here. Six weeks ago, Dow was 30 percent higher than now. Corrections over a long run are good, it wipes out leverage and then reassert it. Hence, five years from now, those who are adding risk, will feel pretty good about it," he said.

Fink said the pandemic would force more and more businesses to think about ways to be more connected in the societies they work in.

Some people were thinking that globalisation created the virus. “In my conversation with CEOs, their attitudes have not changed,” he said.
“Globalisation had lifted more human beings up in shorter period of time than anything we could image, this won’t change. Trend towards globalization is not going to go away.”

Moneycontrol News
first published: Apr 2, 2020 12:21 pm