Larry Fink: Market Could Go Higher As “Fear Of The Future” Draws Flood Of Retail Money
Tue, 10/13/2020 – 11:40
BlackRock reported on Tusday that its total assets under management swelled to $7.8 trillion during Q3 even as Robinhood draws so many new millennial customers that it has prompted mutual fund dinosaurs to fret about an exodus of client money.
Of course, BlackRock’s specialty is ETFs. Unlike mutual funds, ETFs trade intraday, giving millennial traders that non-stop rush of trading action that helps to feed their delusions of day-trading glory. BlackRock does that, and so much more the ‘systemic importance of the asset manager/shadow bank was highlighted earleir this year by the Fed’s decision to tap BR to execute purchases of corporate bond ETFs as part of the CBs’ expanded stimulus program.
Largely thanks to his firm’s success, BlackRock founder and CEO Larry Fink has morphed into a CNBC-lebrity, often joining the network’s jornalists to comment on the financial trends of the day, or offer his personal view on where markets are headed.
But on Tuesday, with BlackRock’s latest earnings haul fresh in the headlines, Fink was asked about how retail traders are transforming the asset-management industry. Ignoring the deep economic scarring endured by many, Fink replied that the outbreak is forcing people to rethink how they save and invest.
“Covid and the fear of the future has created probably a higher savings rate — we have people focusing on the long term a little more,” Fink said during the post-earnings call with reporters and analysts. “It’s leading to more savings and more investing for the long term.”
As discount brokerages like Robinhood signed up hundreds of thousands of new customers, BlackRock reported flows into all of its business lines. Retail clients added a net $19.6 billion to BlackRock funds in the period. Buyers of BR’s iShares exchange-traded funds, many of them retail investors but also institutions, took in a net $41.3 billion.
In an interview on CNBC that followed the call, Fink expounded on that point, perhaps without realizing that “FOMO” – or “fear of missing out” – has been an important factor driving markets for a long time.
“The pandemic actually has created that fear of the future, and the response is a higher savings rate in America, and a higher investment rate for the long-term,” Fink said Tuesday during the CNBC interview.
The subtext is clear: to any retail traders watching, instead of throwing your money away on those Nikola calls, maybe think about plunking your tendies into a more staid benchmark-tracking offering from BlackRock at just 3 basis points a year.
According to the latest data, the savings rate in the US has plunged in recent months as we move further and further away from the late summer’s fiscal cliff.
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