Laurence D. Fink, chief executive officer of BlackRock Inc., the world’s largest asset manager, said Cyprus is not a major problem and U.S. equities will rise 20 percent this year as the economy rebounds.
“It has some symbolism impact on Europe, but it’s not a really major economic issue,” Fink said in a Bloomberg Television interview in Hong Kong. “It’s a $10 billion issue. It does remind us of the frailty of Europe. It does remind us that the European fix will be multiple years.”
Cyprus is the fifth euro-zone country to seek a bailout since 2010 to avoid a collapse of its financial system. Its parliament rejected an unprecedented levy on bank deposits, dealing a blow to European plans to force depositors to bear part of the rescue burden in a standoff that risks renewed tumult in the euro area.
Europe will come to some resolution over Cyprus, Fink said.
“But it’s really a debate upon whether you are going to have the EU becoming more controlling, if there’s going to be funding in Cyprus, how that funding will be, who will bear some of the responsibilities,” he said.
Fink said we’re on the “third inning” of the European debt crisis with six more to go.
“This is a long process,” he said, applauding work done in Spain and Italy in the last year.
Quite a few clients were taking “some chips off the table” to reap some of the gains after a rally in the markets this year, he said. The MSCI World Index has risen 6.5 percent this year and 14 percent since Nov. 16.
“It was really people putting money to work and now some people are taking that money off,” Fink said. “Depending on the economic information that we receive, we can be in the beginning of a 5 percent correction or we’re going to be in a probably prolonged one- or two-month pause, which I don’t mind. But I would say by year-end equity markets are going to be much higher.”
The dollar will “revalue upwards” in the next two years, while the yen will stabilize at 95 yen to 100 yen to the dollar this year, Fink said.
BlackRock joins Pacific Investment Management Co. Co-Chief Investment Officer Bill Gross in seeing a sustained turnaround in the U.S. economic expansion. Gross earlier this month doubled his forecast for U.S. real economic growth to 3 percent for the year, from the company’s December projection of 1.25 percent to 1.75 percent on housing market recovery and nominal growth.
Builders began work on more houses in February and permits for future construction climbed to the highest level in almost five years.
“If anything, we have migrated our view to a little higher” than the 2.5 percent-plus estimate, Fink said. “If it wasn’t for Washington and the uncertainty that Washington has created, we’ll probably be navigating closer to 4 percent.”
Japan’s equity market is still underinvested and the government’s efforts to stem deflation mean that companies like Toyota Motor Corp. will have record profits, said Fink.
BlackRock, with about $3.8 trillion in assets, said March 19 that it is cutting about 300 jobs. Net hiring globally will be 500 people by year-end and 20 percent of that will in Asia, Australia and Japan, Fink said.
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