Stocks globally could continue to rise as interest rates remain low as investors who have stockpiled some $70 trillion in cash seek higher returns from the market, BlackRock Inc president Rob Kapito said on Tuesday.
“People are tired of earning zero,” Kapito said at the Barclays Global Financial Services Conference in New York, referencing slim returns on short-term savings and in bond markets.
“There’s more cash in the system than ever before.”
Kapito said some $10 trillion of the cash is effectively earning a negative yield, eroding savings, but that investors have found fewer opportunities to deploy money in the markets. Central banks have accelerated bond-buying and other efforts to stoke inflation.
Kapito described his clients as “very unhappy” about earning less on their money. When they decide to put that cash to work, he said, it could be a boon for stocks despite concerns that stocks are already richly priced.
Heavier stock investment could also benefit asset managers, he said, who generally earn plumper fees for managing stocks than cash.
Asset managers have been battling market swings and weathering a move to often lower-cost, index-tracking funds.
Kapito said that move from “active” to “passive” funds makes sense given the higher returns of many index funds, but he said the trend would reverse as asset managers boost performance and rely more on complex data analysis to generate investment ideas.
New York-based BlackRock, which manages nearly $5 trillion in assets, is the world’s largest asset manager. The company manages both active and passive funds.