Fink's argument, which he made during an interview with Bloomberg TV, is based on the idea that stocks should outperform bonds in the backdrop of an easy-money policy. Add to that valuations that are at 20- or 30-year lows, and you have a recipe for solid stock returns.
|Larry Fink, CEO of BlackRock|
Chris Konstantinos, portfolio manager at Riverfront Investment Group, likens it to the 1990s when the opposite scenario was true -- stocks were overvalued and bonds were undervalued. Investors have to decide how much they are willing to pay for overvalued bonds now.
With cash accounts yielding returns of zero, and the 10-year Treasury yielding 2% and inflation at about 2%, investors should be considering other investment vehicles. Bill Stone, chief investment strategist at PNC Wealth Management, calls it and era of financial repression. He explains it's hard to get ahead leaving money in savings accounts and bonds unless the world falls apart.Fink, who co-founded BlackRock in the 1980s primarily as a fixed-income manager, goes on to back up his equities strategy by explaining: "I don't have a view that the world's going to fall apart. So you need to take on more risk." The problem with taking on more risk is the issue of volatility. Stone expects 2012 to be a volatile year and would recommend diversifying a bit to help offset those swings, but overall he views stocks as an investment that will provide solid returns this year. Even Nouriel Roubini, the economist and NYU professor sometimes known as Dr. Doom, is turning bullish on stocks. According to an interview with CNBC, Gina Sanchez, who is the director of equities at Roubini Global Economics, says Dr. Doom likes cyclical stocks, such as those in the technology sector. He is even looking to staples and telecom stocks for their high yields. But be sure that Roubini's view includes an end to the party in the second half of the year as global markets remain a risk. Most managers would recommend a more practical strategy of diversifying your portfolio 60% to stocks and 40% to bonds in a normal environment, maybe now is the time to tip it a little more towards equities to achieve better returns. >To contact the writer of this article, click here: Lindsey Bell. >To follow Lindsey Bell on Twitter, go to http://twitter.com/lindseycbell.
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