Market Extra: BlackRock’s Rick Rieder sees ‘epic’ cash on sidelines as he takes lead role on new ETF

by | May 23, 2023 | Stock Market

There’s an “epic” amount of cash on the sidelines as investors assess a slowing U.S. economy and the debt-ceiling debate in Washington, according to Rick Rieder, chief investment officer of global fixed income at BlackRock. “I’ve never seen so much money sitting in cash,” Rieder said Tuesday during a BlackRock media briefing at its New York office on markets and the firm’s new, actively managed exchange-traded funds.

Related: A debt-ceiling deal will spark a new worry: Who will buy the deluge of Treasury bills? Rieder is the lead portfolio manager of the new BlackRock Flexible Income ETF
the first active ETF managed by Rieder, according to a BlackRock statement on Tuesday. Rieder said during the briefing that he sees a “very high probability” that a debt-ceiling deal gets done ahead of a looming deadline for Congress to lift it or leave the U.S. facing the possibility of soon running out of cash to pay all its bills. Market disruption from the U.S. defaulting on its debt would be “significant,” as Treasury bills are used as “collateral” globally, he said. Read: Debt-ceiling angst sends Treasury bill yields toward 6% As portfolio manager of the BlackRock Flexible Income ETF, Rieder said he’s targeting a yield of “just under 7%.” The rise in interest rates over the past year has made it possible to target such a yield in debt markets with less risk-taking than would have been needed at the end of 2021, according to Rieder.  He plans to invest opportunistically, including in areas harder for many investors to reach in “complex” fixed-income markets, such as exposures to mortgages and collateralized loan obligations.  In his view, the U.S. economy is in “better shape” than many people give it credit for at this stage in the cycle. While growth is slowing, Rieder said he doesn’t see a “deep recession” impending, citing a low unemployment rate, wage growth and excess savings in the economy.  He anticipates the Federal Reserve may pause its rate hikes at its next policy meeting, as inflation has been easing even if it remains “sticky” in core services. The Fed has aggressively raised rates over the past year in a bid to bring down hi …

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