Tags: blackrock | larry fink | deficit | budget | stock | investors

BlackRock Chief Larry Fink: Soaring US Deficit Will Kill Stock Rally

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Friday, 09 November 2018 02:59 PM

BlackRock Chairman and Chief Executive Larry Fink is warning savvy investors to keep an eye on the skyrocketing federal budget deficit because it could kill the seemingly endless bull run stock-market rally on Wall Street.

The White House in July quietly released midyear budget guidance that shows the 2019 deficit surpassing $1 trillion, an update that worsened since the administration's projections in February.

The update released by the Office of Management and Budget (OMB) projects that the tax cuts legislation passed by President Donald Trump and congressional Republicans will add $101 billion to next year's deficit and surpass the $1 trillion mark a year earlier than expected.

Fink said the U.S. was heading towards a “supply problem” as the widening budget deficit, expected to top $1 trillion each year starting in 2019, requires more borrowing, Yahoo Finance explained.

"I do believe with the deficit at (over $1 trillion), that we're going to have more and more debt. Investors are going to demand a bigger premium, and we have greater risk of higher rates which will not allow equity markets to flourish,'' Fink recently said at the Bloomberg New Economy Forum in Singapore, the Business Times reported.

"If the economy does slip because of trade imbalances or trade problems, we (could) see less growth. The problem is the deficit is very large and we're fighting with our creditors worldwide. Generally when you fight with your banker, it's not a good outcome.''

Fink isn't alone in such warnings.

Former Federal Reserve Board Chairman Alan Greenspan, in numerous recent interviews on a book promotion tour, has warned he sees a wide variety of threats to President Donald Trump's robust economy.

"Crises gets generated after a period of time when you disregard [something],” Greenspan told Barron’s.

“Most recently, we’ve disregarded the federal budget. We are going to have a $1 trillion deficit in the next fiscal year." said Greenspan, who led the Federal Reserve from 1987 to 2006, serving through booms and recessions.

"But when inflation goes up to 4% to 5%, it is politically disastrous. That's when it becomes an issue. But when it starts rising, it’s already too late in the game to stabilize it," Greenspan said.

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BlackRock Chairman and Chief Executive Larry Fink is warning savvy investors to keep an eye on the skyrocketing federal budget deficit, on track to top $1 trillion next year, because it could kill the seemingly endless bull run stock-market rally on Wall Street.
blackrock, larry fink, deficit, budget, stock, investors
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2018-59-09
Friday, 09 November 2018 02:59 PM
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