Investment giant warns of difficult times ahead in volatile global market
BlackRock Chairman Laurance Fink has warned of the uncertainty facing investors following the adoption of negative interest rates by central banks attempting to ignite economic growth.
In a letter to shareholders in the BlackRock 2015 annual report, Fink addressed these actions, stating that banks are punishing the world's savers and making incentives to reach for yield, pushing investors into less liquid asset classes and increased levels of risk. In addition to the dangerous financial and economic consequences of this, the fragility of the global economy is, according to Fink, mirroring the lead-up to the global financial crisis (GFC).
Fink described the current market as being a ‘hostile landscape', in which banks will continue to drive volatility.
"Markets are still digesting the dramatic shift in the cost of energy as a mix of technology and geopolitics has transformed supply…technology continues to disrupt many industries and even societies as it reshapes global employment markets," he said.
"Our mission for investors has never been more vital."
Fink has also warned of a waning boom in China as a threat to global growth and investment security.
"In China, the waning construction boom has left a lasting impact on real estate values…raiding questions on how the country will fuel future growth," he said.
"Selloffs in the Chinese markets and inconsistent policy responses have heightened investor frustration and uncertainty and threatened global growth."
Fink is confident that the ability for investors to plan and save for the future will get increasingly more difficult, with consumers who save for retirement needing to reduce spending to reach income goals.
"The world is undergoing significant technological and demographic changes. While the valuations of many high-growth tech firms have fallen in recent months, automation and innovation are accelerating, putting downward pressure on jobs and transforming industries," he said.
In addition to technological and social disruption, Fink has termed electoral politics as a contributor to volatile global markets.
"Polarizing elections in the US and Germany, government transitions in Spain, Taiwan and Canada; allegations of scandal in Brazil and the UK voting on whether to leave the European Union will all continue to drive volatility," he said.
Blackrock is encouraging investors to understand the movements of the financial ecosystem across the globe and to work to a long-term growth strategy.
"The uncertain environment we face, while unsettling for many, is also an opportunity to look out to the future, to use technology in innovative ways," said Fink.
"It is an opportunity to shape the future of our industry."
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