Even BlackRock, the world’s largest asset manager, is pushing a strong cash position while at the same time predicting a “sharp” economic recovery, owing to Congress’ passage of the largest fiscal relief package in history.
“We emphasize portfolio resilience through a benchmark allocation to government bonds, quality equities, cash, and sustainable investing,” read the most recent market outlook from the world’s largest asset manager. BlackRock, which manages almost $7.4 trillion in client assets, emphasized that enhancing its cash stash is a vital move to make now.
The institutional investor said it sees cash as a guard against a negative supply shock that could drive stocks and bonds lower. BlackRock, whose own balance sheet boasts about $169 billion in assets, holds just $4.8 billion in cash and cash equivalents as of December, according to its financial statements. The company’s pumping up of its cash position is part of a trend among large companies.
A host of corporations, including financial firms, have been raising their cash reserves to weather the market downturn. For instance, leading entertainment companies Comcast and Disney respectively raised $4 billion and $6 billion earlier this month, according to Deadline. They sold debt securities as they shuttered theme parks and shifted movie production schedules.
But BlackRock believes the markets will recover in one or two quarters following a sharp downturn, especially after the $2 trillion economic stimulus package that was passed Friday.
The asset manager last week was tapped to take over the Federal Reserve’s bond-buying program, the second time BlackRock was asked to support the government during a financial crisis. In the 2008 debacle, BlackRock was one of several Wall Street firms that Washington enlisted to sell off troubled assets, such as mortgage-backed securities.
Additionally, the asset manager said it prefers US and Chinese equities and credits, as the world’s two largest economies move to deliver swift policy response to the crisis.