'Not a 2008 redux,' but BlackRock is ready for opportunities amid 'damage' of rate hikes and recession
By Joy Wiltermuth
'We stand ready to seize opportunities as the damage of rate hikes becomes priced in,' says BlackRock
Waiting for central banks to slash rates? Think again.
That was BlackRock (BLK), the world's biggest asset manager, on Thursday warning investors not to count on cracks in the banking sector to spur central banks to cut rates "as they used to do in episodes of financial stress."
While pointing to different "cases" in the banking sector that have emerged in the U.S. and Europe, BlackRock Investment Institute strategists said investors "clearly are looking at bank vulnerabilities through a new, high-interest-rate lens," in a Thursday client note.
Even so, betting on central banks to abandon planned rate hikes would be "misguided," the strategists wrote. Instead, they see more rate increases in the coming days as central banks "to try to rein in persistent inflation," while regulators also offer support to the banking system, as needed.
With that, BlackRock, which oversees about $10 trillion in assets, sees fallout and "recession coming," due to "damage" caused by the fastest pace of rate hikes since the 1980s -- but also opportunities in short-term government bonds and emerging-market equities.
The 2-year Treasury rate BX: TMUBMUSD02Y was at 3.9% on Friday, but off its 5.06% high about a week ago. U.S. stocks ended higher Thursday after the First Republic rescue plan emerged, but fell Friday. The Dow Jones Industrial Average is down 4.7% for the year, while the S&P 500 index is up 1.8% and the Nasdaq Composite Index is 10.6% higher in 2023, according to FactSet.
A group of America's biggest banks on Thursday pledged $30 billion in deposits to First Republic Bank (FRC), which saw its stock price earlier in the session fall to a record low on concerns about risks at banks in the wake of the failures of Silicon Valley Bank (SIVB) and Signature Bank (SBNY) in New York.
Related: Banks borrow $165 billion from the Fed after SVB failure
Credit Suisse (CSGN.EB) also took up the Swiss National Bank's offer of a $54 billion loan late Wednesday, after its shares fell to about $2 a share in New York trading.
In central bank action, the European Central Bank on Thursday went forth with a 50-basis-point rate increase, despite concerns about the banking sector, while also saying future decisions would be depend on financial and economic data.
See: Fed likely to follow ECB's playbook and hike interest rates next week
"This is not a 2008 redux, and we stand ready to seize opportunities as the damage of rate hikes becomes priced in," BlackRock strategists wrote.
-Joy Wiltermuth
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 17, 2023 11:41 ET (15:41 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.