“In the long run, the current banking crisis will give more importance to the capital market.” This is one of the messages from Larry Fink, CEO and co-founder of BlackRock, in a letter to investors.
“Music plays a big role in my life.” This is how the letter of Larry Fink, CEO of BlackRock, to investors begins, which is equally shared with all “stakeholders”, since “the issues they face are basically the same”. The allusion to the music serves to illustrate technological advances, which contribute to the letter’s motto: “making investing more accessible, affordable and transparent for more people.”
But if last year was difficult for the markets, 2023 is also predicted to be difficult: “2022 was one of the most challenging market years in history – a year in which both equity and bond markets recorded losses for the first time in And the challenges will continue until 2023,” he guarantees.
According to the asset manager’s CEO, 2023 could witness a domino in the banking sector. The Federal Reserve raising interest rates by nearly 500 basis points last year is “a price we pay for years of easy money – and that was the first piece of the domino to fall.”
The collapse of Silicon Valley Bank, the largest bank failure in the last 15 years in the US, is a concrete example of the imbalance between assets and liabilities, he points out. “The authorities acted quickly, but markets remain nervous. Will this imbalance be the second piece of the domino to fall?” he wonders.
However, for BlackRock’s CEO, in this imbalance lies an opportunity. “As banks potentially become more constrained in lending or as customers perceive these asset-liability mismatches, I predict that [os bancos] they are resorting in greater numbers to the capital market for funding,” he explains.
And a third domino may fall. Several years of lower interest rates “have led some asset holders to increase their holdings in illiquid investments – trading lower liquidity for higher returns. There is now a risk of liquidity imbalances, especially for investors with “leveraged portfolios”. .
Larry Fink also argues that “after years of global growth driven by high government spending and historically low interest rates, the world now needs the private sector to help the economy grow.”
On the “fragmentation of the economy”, the head of BlackRock warns of changing supply chains to “safer and more resilient” environments – a caution prompted by the war in Ukraine – and also of problems with the supply of grains, whose the “effects are highly inflationary”.
“This ‘trade-off’ between price and security is one of the reasons why I believe inflation will continue and that it will be harder for central banks to control [a inflação] long term. As a result, I believe inflation will remain closer to 3.5% or 4% in the coming years,” he estimates.