Larry Fink Sees the Dow at 30,000 Before 2020
Blackrock’s Larry Fink was on CNBC yesterday with Andrew Ross Sorkin, Joe Kernen, and Becky Quick. Fink said the market was currently fairly valued with its PE of 15-16. Fink stated there was no question in his mind that equities remain fairly cheap.
Fink believes the biggest problem is a duration gap of what we’re putting into our pensions in terms of maturities and what our actual needs are. You don’t want to get your duration in 30 year bonds at a three percent rate, but you can get duration through equities, he added.
Sorkin posed the question of what would happen when the Fed takes its “foot off the gas,” to which Fink responded it would result in higher rates, but not significantly higher. Rates may go up 50 to 100 basis points, but would still be supportive of an equity market at that level, he stated. He doesn’t foresee the Fed tightening anytime soon.
Fink elaborated on worldwide economic conditions which are mixed and the deleveraging he sees continuing.
Kernen brought up the $100-$200 trillion of unfunded government liabilities (healthcare and social security). Fink agreed it was a lot of money, but pointed out that consumer debt levels were back to the average of the past 10 years, however, they remain above the levels during the 90’s.
Fink sees the equity market in a long-cycle up move that could last 5-6 years while generating 8-10% annual growth resulting in a Dow of 30,000 in the year 2019.
Back in February 2012, Fink provided his reasoning for it being an easy decision for investors to allocate 100% of their financial assets into equities [link].