'Record amounts' of cash held outside of risk assets is likely to lead to a runaway rally in equities on easier policy, BlackRock boss Larry Fink has suggested.
Speaking to CNBC’s Squawk Box yesterday, Fink (pictured) suggested that with ‘record amounts of money in cash’ and continued outflows from equity funds, investors are yet to take advantage of a recent reversal in the Fed's guidance.
He said: ‘We have a risk of a melt-up, not a meltdown here. Despite where the markets are in equities, we have not seen money being put to work.’
Fink gave the example of fixed income, which ‘people had to rush into’ in the first months of 2019 as it became clear interest rates would rise at a slower pace than many expected.
Fed chair Jay Powell in January revised his insistence the bank was on an ‘autopilot’ toward higher rates.
Instead he said he was ‘listening carefully’ to investor sentiment and would respond with ‘sensitivity to the message that the markets are sending’ and would be taking ‘downside risks into account’.
Having as recently as September 2018 forecast four hikes this year, at its latest meeting the Fed proposed no further increases in base borrowing costs until 2020 at the earliest.
Investment Association data for February showed equity as the worst selling asset class among UK-domiciled funds, with £446 million withdrawn by investors.
Withdrawals from UK equity funds since Brexit topped £11.5 billion, while the Europe excluding UK sector lost £347.3 million in the month.
Global equity funds were the most favoured regional category, gaining monthly inflows of £282 million.
Earlier this month, BlackRock reshuffled its global allocation, fixed income and alternatives teams, with global chief investment officer of fixed income Citywire A-rated Rick Rieder becoming a portfolio manager on the global allocation strategies.