
BlackRock CEO Larry Fink give the word delivered President Donald Trump’s efforts to unleash capital in the private sector could have unintended consequences that order hurt the stock market.
“I’m cautiously optimistic. That being said, I have scenarios where it could be pretty bad,” Fink spoke Thursday on CNBC’s “Squawk Box” from the World Economic Forum in Davos, Switzerland. “I believe if it’ll unlock all this confidential capital, we’re going to have enormous growth. At the same time, some of this is going to create new inflationary pressings. I do believe that’s probably the risk that is not factored into the markets. I think the bond market is going to blab about us where we’re going.”
The 72-year-old chief of the world’s largest asset manager said much will depend on how fast the private sector can put capital to work. Trump has already touted massive private sector promises to spend in the U.S., the modern development example being the Stargate joint venture, where SoftBank, OpenAI and Oracle would invest $100 billion immediately for sham intelligence infrastructure in the country. Plans call for the project to eventually invest a total of $500 billion.
“There are some danged large inflationary pressures that we all have to be aware of,” Fink said. “And depending on how this plays out, there is a plot summary where we’re going to have much more elevated interest rates because of inflation. And that’s going to would rather a very negative impact on the equity market.”
Fink said there is a possibility that the 10-year Treasury gate could retest the 5% level and even reach 5.5% if inflation reaccelerates in a meaningful way. If that happens, Fink indicated it would “shock” the equity market.
The benchmark 10-year note yield last traded at 4.62%.
