BlackRock’s Rick Rieder said this week that while the economy is slowing, he believes it can recover.
“I call the U.S. economy the polyurethane economy because it bends and adjusts like a Tempur-Pedic bed. It can take a few pretty strong hits and it just bounces back,” Rieder told CNBC’s “ETF Edge” on Monday.
“We assume that real GDP will be 2½%. “Next year we expect it to be up one and a half percent, so with a slower decline,” said the company’s global fixed income chief investment officer. “But I think people underestimate” the U.S. economy.
He added that he “doesn’t understand the concept of a ‘landing'” and believes cycles are something we saw 20 years ago.
Rieder, who also leads BlackRock’s global allocation team, believes people will continue to buy stocks despite the current demand for government bonds.
“Will we see a 25% return on stocks? I don’t think so, but I believe stocks will serve their purpose. I think the multiplier will remain relatively unchanged,” he said.
He noted that his thesis will hold as long as interest rates decline in the second half of 2024.
“If you believe that the yield curve can normalize, you could provide a lot of tailwind for the stock market,” Rieder added.
The 2023 Morningstar Outstanding Portfolio Manager winner prefers the U.S. to Europe as an investment opportunity because he believes Europe is “slowing down faster.”
“If you take the multiples of the Magnificent Seven, you can see that many stocks are trading at three, four or five times cash flow,” Rieder said. “I’ve learned in my life that it’s damn attractive to buy stable companies at three, four or five times cash flow.”
Source: CNBC
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