By Jessica Hall
Successful long-term investing requires “trust in the financial system and the fundamental belief that tomorrow will be better than today”
BlackRock Chief Executive Larry Fink has raised the specter of the “silent crisis” of retirement facing the global economy, as rising longevity makes issues like higher housing and healthcare costs even more daunting for retirees.
In his closely watched annual letter, Fink, the co-founder of the $8.6 trillion wealth manager (BLK), said “investing toward a financial goal like retirement is an act of hope and optimism that takes a long-term perspective and confidence.” in finance demonstrates institutions and a belief in the integrity of the market.”
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Fink pointed to lower market return expectations, higher housing and healthcare costs for retirees, and the shifting of retirement risk onto individuals as factors making it difficult to support longer lifespans.
Fink said some of the issues driving the pension crisis are populations in Europe, North America, China and Japan who are aging due to longer lifespans and declining birth rates. In the US, for example, 10,000 people turn 65 every day.
“This is having a profound impact on each of these markets over time. It will lead to a smaller labor force and cause incomes to grow more slowly or even fall,” said Fink.
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Another challenge is understanding why some people can save and invest effectively for retirement and others cannot, even in wealthier countries.
“In some countries people actually save too much but invest too little. If they leave their money in the bank instead of investing it in the market, they won’t get the returns needed for a dignified retirement,” Fink said. “To retire comfortably, people need to invest their savings for decades and reap the long-term returns that capital markets growth delivers.”
Long-term investing for goals like retirement requires faith and optimism, Fink said.
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“Long-term investing requires faith in the financial system and a fundamental belief that tomorrow will be better than today. Today we need leaders who give people reason for hope and who can articulate a vision for a better future. And that’s what we need institutions that inspire trust,” Fink said. “So much of what we’ve lost in recent years — through Covid, war in Europe, political polarization, geopolitical fragmentation and macroeconomic shifts — has optimism, trust and… eroded belief in a better future.”
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Fink pointed to issues that have eroded trust, such as fears for economic security, fears about the next generation’s inheritance, and fears about how the economic and political landscape will shape the future.
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When people are scared, they might save money, but they won’t invest unless they have hope for the future and believe in the integrity of financial and regulatory institutions, he said.
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“But I remain an optimist. The world has faced major crises before. We have overcome them by facing problems, envisioning a better future, making connections and driving innovation. We must do the same today. Our job as leaders is to show people how they see opportunities in challenges that can be seized,” said Fink.
-Jessica Halle
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(ENDS) Dow Jones Newswires
3/18/23 1204ET
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