BlackRock’s Co-founder Predicts Market Rebound Due to Cash Influx and Interest Rate Changes

At the Asia Pacific Financial and Innovation Symposium in Melbourne, BlackRock Inc.’s co-founder, Robert Kapito, predicted that markets are set for a comeback. He pointed out that there is currently almost $9 trillion in money market funds and an equal amount in cash alternatives at banks, emphasizing the significant impact this money will have on the equity market.

Kapito urged investors to closely monitor the influx of cash into the market, noting that the Federal Reserve’s upcoming decisions on interest rates could influence their decision to move away from cash. With strong US growth and persistent inflation, there is a higher chance that the Fed will raise interest rates rather than cut them, potentially pushing borrowing costs up to 6.5% next year based on UBS Group AG strategists’ predictions.

In January, Kapito highlighted the large cash pile sitting in money markets and suggested that some of this money might move towards model portfolios and exchange-traded funds if interest rates decline. He also mentioned the trillions of dollars of dormant cash that could be redirected to bonds if interest rates decline.

BlackRock is positioning itself as a comprehensive investing solution, offering a full range of options, including alternative assets that are increasingly popular among institutional clients like pensions, endowments, and sovereign wealth funds. While alternatives currently make up around 3% of BlackRock’s assets under management, they generate about 10% of fees for the company.