BlackRock is one of the world’s largest asset managers with close to US$7 trillion of assets and is a major exchange traded fund (ETF) provider.
What Does BlackRock Predict Will Happen?
Mr Kapito is a co-founder of BlackRock and oversees day to day operations of the funds under management business. Recently speaking to the Australian Financial Review, Mr Kapito said that investors have US$50 trillion of cash but can’t find a place to put it to work.
Part of the problem is that there has been a number of share buybacks, causing global share markets to shrink, and there has also been few new large businesses hitting the public markets.
There are also few opportunities in the bond market with central banks being major buyers of long-dated bonds.
So, the only real option for investors to go for is the sharemarket. With there being more money flowing into equities, this slowly pushes values higher.
Mr Kapito pointed to the fact that bonds being issued in Europe have a negative yield, which doesn’t make sense for investors looking for a return.
What Does This Mean?
It makes sense that investors are looking to the sharemarket like an S&P 500 fund to help them make the returns they’re after. On the ASX, an S&P 500 fund investment option by BlackRock is the iShares S&P 500 ETF (ASX: IVV).
The sharemarket has delivered the best returns over the long-term because of a company’s ability to grow profit and provide compounding returns. This can’t happen with bonds or similar fixed-return assets because the money they generate cannot change.
However, if every investor is going for the same assets then it pushes up the value, perhaps too much, which brings forward returns and hurts future returns.
We live in a very strange investment world with ultra low interest rates. I only want to buy shares of assets that make sense, with one being outlined in the free report below.
At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.