Despite saying that the economic impact of the coronavirus is unlike anything he’s experienced in his 44 years in finance, BlackRock CEO Larry Fink is cautiously optimistic the economy will have a steady recovery.
“The coronavirus has overtaken our lives and transformed our world, presenting an unprecedented medical, economic, and human challenge,” Fink wrote in a letter to shareholders while in isolation at home. “The implications of the coronavirus outbreak for every nation and for our clients, employees, and shareholders are profound, and they will reverberate for years to come.”
Fink said the pandemic has not only pressured financial markets and near-term growth, but that it has “sparked a re-evaluation of many assumptions about the global economy,” and has caused people to fundamentally rethink the way they work, shop, travel, and gather. “When we exit this crisis,” Fink wrote, “the world will be different. Investors’ psychology will change. Business will change.”
However, Fink said that as dramatic as the financial impact of the virus has been, he believes “the economy will recover steadily, in part because this situation lacks some of the obstacles to recovery of a typical financial crisis.”
Fink noted that central banks are moving quickly to address problems in the credit markets, while governments are aggressively enacting fiscal stimulus packages to soften the economic blow.
‘The speed and the shape of these policies are deeply influenced by the world’s experience during the global financial crisis in 2008,” Fink said. “I also believe their actions are likely to be more effective and work more quickly since they are not fighting against the same structural challenges as they were a decade ago.”
But Fink cautions that he isn’t suggesting that the markets have reached their bottom, which he said “is impossible to know,” and said there are “significant challenges ahead,” particularly for businesses that are heavily in debt.
Fink added that “if governments are not careful in the design of their stimulus programs, the economic pain from the outbreak will fall disproportionately on the shoulders of the most economically vulnerable individuals.”
Fink also said the pandemic is reinforcing how important technology is for asset managers.
‘The biggest change for asset managers will be how we use technology,” Fink wrote. “In the future, asset managers have to be as good at using technology as anything else they do—and as good at it as any tech firm. It has to be part of who they are.”
He said asset managers will have to fully integrate technology to connect with clients, generate investment insights, create operational efficiencies, and unify their organization on a single platform.
“Volatility of the markets, and the speed with which they have moved these past few weeks, reinforces once again how essential technology is to managing risk today,” Fink wrote. “Our employees are caring for their families and loved ones while also adjusting to remote work and the challenges of isolation. Making this transition successful has depended on careful planning and robust technology.”