Despite some outflows, BlackRock ETFs are seeing increased activity. This is the influence of market sentiment on the outflow of funds. We have a better understanding of market sentiment through our ETFs. The market is now experiencing fear due to geopolitical issues, which has led to a flattening of the yield curve (the difference between the yields of government bonds of different maturities).
Interest rates
Also, the yield curve is flattening because people think we are nearing the end of rate hikes. I still think the rate should be higher than five percent. I think this week's inflation data really shows its resilience. After all, we are still going to increase military spending and there must be changes in the supply chain due to geopolitical issues.
AI
But also, as AI and robotics develop, huge opportunities appear in the near shore (moving production closer to their markets or consumers). We are witnessing a restructuring. As I said a couple of quarters ago, people are overestimating other dependencies, and one of the strongest dependencies in the world is still the amount of production collected in China. Technology allows us to recalibrate this. And then we also recalibrate. You look at the growth rate of India. Look at Mexico's growth rate, great opportunity in the long term. The level of investor interest in Japan has increased greatly.
Long-term bonds
As rates rise, there will be more immunization of older defined benefit pension plans. As liability rates rise, we are seeing more pension funds and corporate funds actually matching assets and liabilities. This way, they can protect themselves from volatility. And that means they'll sell stocks, buy longer-term bonds, and it will happen. So far this is not happening. If you start earning 10 to 12% on infrastructure investments as the Infrastructure Act passes, as you roll out your IRA, then it will be a good, healthy, long-term investment that will generate 8 to 15% returns. with a high probability of success.
Because of the potential of AI in healthcare, we can increase the average life expectancy to 75 years. So if we're going to live longer, are we adequately prepared? And if you could start investing in bonds at 7 - 9% for 10-20 years, it would give you much more confidence for retirement.
China
Our relations with China are too overrated, China has fulfilled only part of its obligations. They don't invest. They are not buying more and more American goods. We are trying to make our trade more consistent with each other, but his actions suggest otherwise, such as supporting Russia. And I think we'll see a systematic capital flight out of China if they don't refocus on serving their customers.
Conclusion
In 10-20 years, humanity will be in a better position than it is today. From this point of view, I want to own hard assets. I want to own shares. I want to be part of this economy.
I'm staying at BlackRock, I'm not going anywhere. I am energized by having deeper connections with our clients. The opportunities I see for BlackRock overseas are fantastic. Capitalism shows every day that it is the best economic force in the world.
