With U.S. stocks at record levels. investors should buy assets such as real estate and infrastructure funds, BlackRock Inc. president Robert Kapito said Tuesday.
Investors can't get sufficient diversification from stocks and bonds because the two asset classes are moving increasingly in tandem, Mr. Kapito said in a Bloomberg Television interview.
“Stock prices are more about momentum” and have been fueled by more by stock buybacks than by revenue, Mr. Kapito said. “We want people to get into the market but in a much more diversified way.”
BlackRock, the world's biggest money manager, today released its 2014 investment outlook, predicting that global stocks will climb in the coming year. There is a 55% chance of “tepid” economic growth in 2014 with developed economies expected to accelerate in tandem for the first time since 2010, according to the BlackRock report. U.S. growth will reach 2.5%, BlackRock estimated.
As confidence has grown that the global economy can withstand a cut in stimulus from the U.S. Federal Reserve, the S&P 500 has jumped 27% this year, heading for its biggest annual gain since 1997.
BlackRock's chief investment strategist, Russ Koesterich, said stocks in Europe offer better value for investors than equities in the U.S. Parts of the U.S. market are “frothy,” while companies in Europe are still reasonably priced, he said at an investment conference hosted by BlackRock in New York.
BlackRock forecast in its outlook that the Federal Reserve will decrease its stimulus-oriented bond purchases “lightly” while keeping interest rates low.
“Tapering aside, 2014 will still be the second-most-accommodative year in U.S. monetary history, after 2013,” BlackRock said in the report.
The ability of central banks to stimulate further growth through loose monetary policies has waned, the company said.
“Monetary growth does not address skill mismatches, aging populations, labor market red tape and protectionist policies,” BlackRock said. “Central banks can ease some of the pain — but ultimately policymakers must deliver structural reforms to boost growth.”