Tags: BlackRock | Lawrence Fink | Larry Fink | Donald Trump

BlackRock's Fink: Baby Boomers Work Against Trump's Growth Plan

BlackRock's Fink: Baby Boomers Work Against Trump's Growth Plan
(AP/Andrew Harnick)

By    |   Friday, 28 April 2017 01:46 PM

Larry Fink, chief executive officer of the world’s biggest asset manager BlackRock Inc., said the Trump administration’s tax plan will have a hard time driving stronger growth as baby boomers age and retire.

“With our demographics it seems pretty improbable to see sustainable 3 percent growth,” Fink said at an investing conference in Chicago. Lower immigration into the U.S. could further erode growth, taking away one of the “major engines of growth,” he said.

Gross domestic product, the broadest measure of goods and services produced in the U.S., rose 0.7 percent from a year earlier during the first three months of the year, according to the Commerce Department’s first estimate. That’s the weakest in three years.

“We’re growing slower than France. That’s really terrible,” Fink said. Part of the slowdown during the first quarter results from doubts over Trump’s agenda, he added.

The Trump administration this week announced a tax-cut proposal that Treasury Secretary Steven Mnuchin said will pay for itself by boosting economic growth. The U.S. economy has grown by 3.2 percent a year on average since 1947, although it never exceeded 3 percent during the Obama administration even as the Federal Reserve held interest rates near zero percent.

Fink said lower rates “unquestionably” can stimulate business investment that will help growth, but the president’s proposal deepens the country’s debts when it already is “on the path of having explosive deficits,” The Wall Street Journal reported.

Growth between 2.25% and 2.75% was more realistic, noting savings from tax cuts should be channeled into an infrastructure stimulus program, Fink said.

Three weeks ago, Fink warned that the stock market will hit some "setbacks" if Trump and Republican lawmakers failed to deliver on the campaign vows of sweeping tax reform and "true deregulation."

Meanwhile, many other business leaders were "stepping back" until they see "real economic growth," Fink told CNBC.

"If you believe it will be longer for these [policies] to transpire — and we have an economy that's slowing because of uncertainty — then I would say the U.S. equity markets are probably higher than they should be," Fink said. BlackRock oversaw $5.4 trillion of investor money as of March 31, according to its quarterly earnings report.

The stock market has risen to record levels since Trump was elected on Nov. 8 after promising a pro-business agenda of tax cuts and less regulation. Now, equity values are on the expensive side, according to some measures.

Yale economist Robert Shiller’s cyclically adjusted price-to-earnings ratio, which compares the current value of equities to inflation-adjusted earnings over the past 10 years, is at levels not seen except for the years surrounding 1929 and 2000. And at 29, the ratio is higher than its highest level before the Great Recession.

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Larry Fink, chief executive officer of the world's biggest asset manager BlackRock Inc., said the Trump administration's tax plan will have a hard time driving stronger growth as baby boomers age and retire.
BlackRock, Lawrence Fink, Larry Fink, Donald Trump
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2017-46-28
Friday, 28 April 2017 01:46 PM
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