Outrageous technological advance. Changing work patterns during the spread of a killer virus. The government’s intertwining of fiscal and monetary policy. These are just some of the happenings that investors are facing, and they were addressed by BlackRock experts looking at the challenges of fixed income investing circa 2020. CEO Larry Fink and his team spoke Wednesday during the Schwab IMPACT conference via webinar.
Fink said humans are adapting in many ways, and people and businesses in Covid times are likely not returning to the way certain things were done before. Now that we can work remotely, “we’re not all going to go back to offices going forward,” Fink said. “It’s a blessing that we can have 60% to 70% of our workforce working in an office and maybe rotating who those people are, and we have 30% to 40% working from home. Can you imagine a life in which you’ve got back an hour and a half to two hours of your day because you’re not commuting anymore?”
At the same time, less congested cities could be good news regarding pollution and sustainability, he said. And education is changing too as people consider learning from home.
“We’re not going to go back to pre-Covid. … I don’t believe we’re going to go back to shopping like we did pre-Covid," Fink said. "I think people are more accustomed to do more internet-based commerce.”
At the same time, the pandemic has ripped the cover off the economy and exposed a painful wealth and income gap. That will hurt people in industries like lodging and hospitality that likely won’t come back soon, he said.
Fink stressed that technology will also play a more important role in the economy and in financial services.
Rick Rieder, BlackRock’s chief investment officer of global fixed income, said in a separate panel discussion that in this unprecedented policy environment the U.S. could be looking at $2 trillion-plus in stimulus, depending on who’s controlling the levers of government. “It’s roughly 20 times bigger than you saw after the financial crisis,” he said.
The massive monetary stimulus from the Federal Reserve is also playing a huge role in the U.S. economy, and he said he thinks the Fed deserves an “A+” in its accommodative posture. The Fed has been aggressive in keeping interest rates at near zero and likely will continue to do so.
“They actually unlocked the top of the capital stack in a lot of assets—commercial real estate, residential real estate, receivables, student loans, etc., which wasn’t always transparent from what the media describes, but it's a really big deal,” Rieder said. He also thinks Europe’s central bankers have done a good job.
A big question is how do you generate yield in this environment?