BlackRock co-founder calls for market resurgence amid liquidity concerns and interest rate uncertainty.

At the Asia Pacific Financial and Innovation Symposium in Melbourne, BlackRock Inc.’s co-founder, Robert Kapito, shared his belief that the markets are poised for a resurgence. He pointed out that there is currently nearly $9 trillion in money market funds and an equal amount in cash alternatives at banks, creating a significant amount of liquidity that could drive the equity market. Kapito urged investors to closely monitor this cash pile as it has the potential to have a major impact.

Kapito also emphasized that investors should keep an eye on the Federal Reserve’s upcoming decisions on interest rates. With strong US economic growth and persistent inflation, there is a possibility that the Fed may raise interest rates, which could reach as high as 6.5% next year according to UBS Group AG strategists. A rate hike could lead investors to shift their money away from cash and into other investment options like bonds and exchange-traded funds.

In addition to positioning itself as a comprehensive solution for institutional clients like pensions and sovereign wealth funds, BlackRock is also focused on alternative assets. Although alternatives currently only make up around 3% of BlackRock’s assets under management, they generate approximately 10% of fees for the company. Kapito highlighted the vast amounts of cash sitting in money markets and the potential for it to be redirected to other assets if interest rates decline. He suggested that a significant portion of this cash could be allocated to bonds and other investment vehicles like model portfolios and exchange-traded funds.