With stock and bond prices falling, U.S. investors should patiently set aside cash and prepare to put money to work later this year, according to Rick Rieder, chief investment officer of global fixed income for BlackRock Inc., the world’s largest asset manager.
“Patience is at the top of my investment pyramid today,” Rieder said during an interview Friday with David Westin on Bloomberg Television’s “Wall Street Week.”
The S&P 500 lost 2.8% and the Nasdaq fell 3.8% this week as the prospect of the Federal Reserve aggressively boosting interest rates to combat raging inflation raised concerns about stocks and the broader economy. Central bank officials have talked about increasing their benchmark rate 50 basis points at their next few meetings, with James Bullard of the St. Louis Fed floating the first 75-basis-point hike since 1994.
While rapid rate hikes have often triggered a recession, the U.S. economy may be able to weather the Fed’s moves because consumers have $2.5 trillion in savings, and both jobs and wages are rising, Rieder said. He expects stocks to trade higher by the end 2022 and sees return opportunities in investment grade municipal bonds as yields near 5%.
“I’m pretty far from this recessionary construct when you’ve got this kind of firepower,” he said.
The economic outlook can still get a lot worse, according to Barbara Ann Bernard, CIO and chief executive officer of hedge fund manager Wincrest Capital. Consumers are likely to hold back on purchases amid inflation, rising borrowing costs and the end of pandemic stimulus checks, she said on “Wall Street Week.”
“I’m very happy that unemployment rates are so low,” Bernard said. “But real wages aren’t rising, they’re falling.”
This article was provided by Bloomberg News.
