BlackRock CEO Sees Great Rotation Within Bond Market

The long-discussed “Great Rotation” won’t be from bonds to stocks, but will be within the bond market, BlackRock Chairman and CEO Larry Fink told CNBC on Thursday, as the investment firm reported better-than-expected earnings.

Fink said in a “Squawk Box” interview that he’s seeing a rotation into high-yield, short duration bonds, as investors try to avoid interest rate risk.

“If you believe interest rates are going higher, [the core bond index] is going to be a painful index to be sitting in,” he said. “We are seeing a rotation from core index into low duration, into high yield.”

In a higher rate scenario, he added, if the stock market also continues to move higher, “you will see rebalancing into fixed income,” as investors take their profits and seek the safety of bonds.

On Thursday, BlackRock said it earned $4.92 a share, excluding one-time items, in the fourth quarter. Analysts had expected the company to report profit of $4.33 a share. Revenue beat estimates, as well, coming in at $2.78 billion.

BlackRock also raised its quarterly dividend by 15 percent to $1.93 from $1.68 a share.

On the economic front, Fink said, “The U.S. is going to get stronger primarily because we more rapidly fixed our banking system.”

“We’re getting better because our companies are sitting on a lot of cash. And I believe the outlook in the United States is stronger, so you’re going to see more investing in capital expenditures in 2014 than you have in 2013 and 2012,” he added.

“Most importantly, our energy sector is so transformational,” he continued. “The cost of electricity, the cost of natural gas is so much cheaper here than Europe.”

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza