BlackRock CEO: Markets Could Fall 15% Without Gov’t Intervention

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September 22, 2016 2:14pm NYSE:DIA NYSE:SPY

Speaking with Bloomberg earlier today, BlackRock CEO Larry Fink said that financial markets could soon correct by up to 15% without significant fiscal accommodation.


Both at home in the U.S. as well as in Europe, he sees big problems to solve. “We’re in more dangerous water in Europe than we have been in years,” said Fink in reference to the Brexit’s delayed effects that still haven’t been realized yet. If the political turmoil there continues, the fallout could be substantial for the global markets. From Bloomberg:

Fink said uncertainty from Britain’s decision to leave the European Union is getting worse. He said chief executives in the U.K. aren’t incrementally hiring and are holding off on investing until there is more political clarity.

There could be hope on the horizon, however — if world governments are willing to stimulate their economies more while also listening to public outcries against low rates:

Fink said he is more pessimistic than the markets at the moment. If governments move to spur their economies, then markets could go in the other direction and rise 10 percent, he told Erik Schatzker Thursday on Bloomberg Television.

The CEO said anger worldwide is growing as persistently low interest rates hurt savers and pension plans, while people with capital are benefiting from the environment. Fink expects that the Federal Reserve will raise interest rates in December.

Perhaps the biggest issue is public anger concerning the financial markets, specifically how savers have been punished for over seven years straight by persistently low interest rates. “We need politicians worldwide to address this anger, [because] anger only gets worse,” said Fink.

The stock market is near all-time highs, and yet the people are angry — that’s probably a first in U.S. history, but with so many Americans feeling so much worse about their financial situation, not unexpected.

DIA-2016-09-22

As Fink admitted, the markets disagree with his pessimistic view. The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) rose $1.27 (+0.70%) to $183.93 in afternoon trading Thursday. The DIA, which is the largest ETF that tracks the DJIA, has gained 5.71% year-to-date.


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