BlackRock's Rick Rieder Talks Trade Tensions

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We begin the sound with trade tensions Wang on the tech sector. Rick Reader of Black Croc writing. Taking opportunistic positions in good quality companies in the equity market has and should continue to pay off for investors with longer time horizons. I'm pleased to say the Rick join us now for more. Rick Reader, it's been too long, my friend. Let's go straight to it. I just want to understand what you've been seeing with the team over the last

So? I mean, boy, it's been an incredible period.

I mean, so you know, to start with, I mean the treasury market to move back in the treasurer of Friday was extraordinary. This pressure on the treasury market, concern about international selling that was that was pretty amazing. And then we bounced back pretty nicely as some calm has come back in and then you know, the volatile and the equity market of the daily volatile a little bit

It is, I will tell you.

The uncertainty though has led to liquidity in these markets that's pretty rough right now.

When you go to execute, you've got to be very.

Thoughtful and very tactical about how you do it because markets are very jumpy and very uncertain these days.

And Rick, typically the place you go FORLL liquidity is the treasury market, deep predictable. That's why people buy treasuries. Rick, can I get your view on what you think was happening last week? Do you believe that was foreigners pulling back? Is there a question mark over the US safe haven status? Or is that just certain traits and winding things blowing up.

It's a great question. I.

So, first of all, you know when you have this pressure on the currency market, and by the way, it's super acute when you think about equities going down the same time that the currency is going down.

Usually the dollar appreciates when you're in this risk off mode.

So you've unquestionably seen the pressure on equities and international disposition of the equity of a number of US equities in the rates market, it's a bit more, but there's no question about it. There is some concern we fund so much of our treasury debt internationally. There is some concern with the currency depreciating, and then quite frankly, that the back end of the curve going through these periods

Of the curve.

So yes, I think there's some international disposition for sure as the currency weakens. But I think broadly it's its uncertainty and it's just hard. You see you watch days like Friday. You know, it's just hard stepping in, particularly in the back end, with this uncertainty still out there.

So rack, at what point would you step in?

So so I like gowning the belly of the yield curve, and I like gowning you know, the front end has gotten pretty well priced. I mean, you've got to and I think the way you all described it, you know, the FED you're pricing an awful lot of cuts for the FED this year and you haven't seen that hard datauration. I do think you'll see that in labor over the

To see it.

But the ability of the Ueld curve, there are some opportunities, and quite frankly, Europe is more interesting because you don't have the inflation impact in Europe.

The ECB has got to cut more aggressively.

So I actually think, you know, we've you know where we've seen some real opportunities.

Actually European rates very different.

And by the way, you don't you don't have the international disposition there. In fact, that's where you have probably international I'm sure you have international buying.

So European rates is a place recently we've liked quite a bit.

Can we take this a step further? You talk about how US treasury markets tend to be the deepest, most liquid, and then you talk about how rocky liquidity has been and how execution risk has become an increasing consideration for you. Have we gone to the point where on some of these days the European rates market has actually been more liquid than the US rates market.

Good question, More quid. I don't know if you know certainly the back end of the yield curve. It takes price to get to get execution. I don't know if it's more liquid, it certainly feels to me like you have this ballast of you've got an ECB moving, you've got a yield curve that's also that's already pretty steep in Europe. And by the way, if you're a dollar investor, you get a cross currency swap benefit, and because of

That just takes some time.

But I don't, you know, I still say the traagery market generally is much deeper, but you know, Europe, you definitely see more buyers coming in internationally as well as what we see in the States.

It seems like the picture that you're painting is a regime change. The picture that you're painting is shifting away from the United States and following a real flood of money into some of the or markets, and frankly not betting that the long end of the yield curve will provide the ballast that it has in the past. Can you talk about what else has changed? Does this really undermine or reshape the way you look at sixty forty or the position of gold in your portfolio?

That is a long it's a great discussion. That's a long discussion. A ton has changed.

Like you say, we've added in the portfolio, is not in our fixed income. At other portfolios we've added gold. We think gold is a is a is a good hedge generally, you know, quite frankly, you have to do during periods like this, you tactically hold more cash.

In the portfolios.

We've done that back end of the yield curve and interest rates and as a hedge when you've got inflation moving potentially signmularly higher, not really a big benefit to the portfolio. So and then the other one, when you get rates backing up, you can get your yield much more attractively using high quality assets. So even though you know you're you know, some pressure on parts of the high yield market, pressure is in the left loan market,

So I like the idea, build some more.

Cash, use some tools that are different than in the past, and then quite frankly, just get higher quality and more liquidity in the portfolio.

Do you think the rhetoric around the fact that some investors are saying they're dumping dollar, dumping treasuries, that the US is losing safe haven reserve asset level.

Do you think that rhetoric is overblown.

I'd say sentiment can change really quickly.

I mean, we're in this period now where there's clearly a concern about the currency, and there's clearly a concern about how do we bring the debt down, how do we get how do we get interest rates down?

So I'd say near term, you know, there is a question listen.

I think reserve currency status status is something that is absolutely critical to the United States.

We fund a lot of deck globally. The number of you know, the percentage of trades in the world.

That happen in dollars bills as a collateral for for for many of the transactions in the world. I think reserve currency status is absolutely critical. Are you denting it? You're definitely denting it. And listen, I think that I think this.

Year is going to change.

I think we've got a couple of months here where there's a lot of uncertainty an economy that's probably in the recession today in terms of certainly where corporate spend will be. And then but I think as you get to the back half of the year, things can really evolve. So listen, I think you're chipping away at reserve currency, but I don't think there's a natural alternative.

So and I, you know, and I think I think things can change. Hopefully they do.

Rick hopefully they do. But that last point there, I think is important. If we are in recession today, do you think risk assets are approprily priced for that scenario?

So I would say, I would say today, listen, I think that I think the tail, the tail has the taist has gotten fatter. I think quality assets there they are pretty reasonable. There's a lot of quality assets we've added to agency mortgages, et cetera. Listen, I think you've got to put a wider range on the equity market today than you've had before. You've got an economy that's pretty uncertain, and you've got to you know, I think you've got to keep your beta a bit more restrained today.

And they've been some great trades. Actually sell downside. We are Gosh.

You know, if we go down another ten to fifteen twenty depending on single name, go down ten fifteen twenty percent, you get paid handsomely for taking that. So keep your beta restrained, hunker down a bit in terms of risk, but then find someplace like Gosh. I would add if we came down, if we if markets went down significantly. So anyway, a bunch of things to do in this market.

In an environment like this, things have changed a lot. Rick is good to see you as always Rick Reader of black Rock there, Rick, Thank you sir. We'll doing it again soon.