NEW YORK (Reuters) - BlackRock Inc (BLK.N) President Rob Kapito on Tuesday said there is a “high probability” that stocks globally are going to rise as more than $70 trillion (£52.1 trillion) in savings enters the market in search of better returns.
Kapito said at a question-and-answer session in New York that cash is also likely to enter the debt market over the long term, keeping interest rates low.
Gravity-defying equities and high-priced, low-yielding bonds in the United States have surprised many investors who predicted either or both markets would short-circuit. U.S. stocks have been in a bull market for the better part of a decade, while the benchmark 10-year U.S. note US10YT=RR yield has not breached 2.65 percent in three years.
Each trend has helped BlackRock draw money into low-fee “passive” funds that track the market and attracted tens of billions of dollars from investors this year. BlackRock is the world’s largest fund manager, overseeing nearly $6 trillion.
Kapito’s remarks anticipating more of the same - low bond yields and high stock prices - echo those he has made at investor events in recent years.
Companies reluctant to invest in their businesses have been funnelling money into share repurchases and dividend payouts, he said, while private companies have been reluctant to go public.
That has conspired to decrease the amount of stock available in the market, according to Kapito, while central banks reckoning with the financial crisis have pushed bond yields lower.
“You may not want to hear this, but there’s not enough stock to buy, and there’s not enough bonds that have any yield to buy,” he said, adding that investors are going to get tired of earning little to nothing on their cash and will move that money into capital markets.
“There’s a high probability that stocks across the globe are going to rise.”
Reporting by Trevor Hunnicutt; Editing by Diane Craft and Jonathan Oatis