BlackRock bond chief Rieder says U.S. economy in 'much better shape' than doomsayers say
Rick Rieder, who oversees $2.4 trillion for BlackRock, is optimistic on the investment outlook despite the debt-ceiling impasse.
Important Points
He said, "I have never seen so many dollars sitting in cash and that's a lot" before they are deployed.
NEW YORK – When the chief bond officer of the largest asset manager in the world looks at the U.S., he finds a lot to be positive about.
BlackRock's Rick Rieder says that the American economy has performed better than expected. This is due to a combination of government, corporate, and consumer spending, improved homebuilder data and $1.5 trillion excess savings.
"I believe the U.S. economic situation is much better than people give it credit for," Rieder said at an event held at BlackRock headquarters in New York on Tuesday.
He said: "There is this thesis that there will be a dramatic decrease in the economy." When you look at the numbers, there's no way to tell.
As the Federal Reserve increases interest rates, the ripple effect is felt throughout the economy. Three midsized banks have collapsed this year, causing concerns that lenders may restrict credit and slow down the economy. However, employment numbers have surpassed expectations. Most recently, in April, nonfarm payrolls increased by 253,000.
When people say, "We're going into a deep or a severe recession," it's unusual [or] impossible, Rieder said.
Many cashs are sidelined
Rieder, a veteran of the market with three decades' experience who manages $2.4 trillion worth of assets, expects that the Fed will pause its rate hikes at the next meeting. The central bank may raise rates again after that but Rieder said the rate-hiking program is mostly over.
Rieder says that this expectation, coupled with a slowing of inflation, provides investors with a positive backdrop, even if he expects the economy to slow down later in the year.
Experts, including Jamie Dimon, CEO of JPMorgan Chase, believe that the biggest threat to Rieder’s thesis is an eventual U.S. sovereign debt default, which would cause panic and could be "potentially disastrous" for the U.S. economy. Treasury Secretary Janet Yellen said the U.S. might not be able to pay its bills by June 1.
He said that Rieder believes there is a "very strong probability" that the Biden administration will reach a deal to work with Republican legislators.
He said, "I have never seen so many dollars sitting in cash and that's a lot" before they are deployed.