BlackRock CEO Fink sees 'Great Rotation' in bonds
The long-discussed "Great Rotation" won't be from bonds to stocks, but will be within the bond market, BlackRock Chairman and CEO Larry Fink told CNBC on Thursday, as the investment firm reported better-than-expected earnings.
Fink said in a "Squawk Box" interview that he's seeing a rotation into high-yield, short duration bonds, as investors try to avoid interest rate risk.
"If you believe interest rates are going higher, [the core bond index] is going to be a painful index to be sitting in," he said. "We are seeing a rotation from core index into low duration, into high yield."
In a higher rate scenario, he added, if the stock market also continues to move higher, "you will see rebalancing into fixed income," as investors take their profits and seek the safety of bonds.
On Thursday, BlackRock said it earned $4.92 a share, excluding one-time items, in the fourth quarter. Analysts had expected the company to report profit of $4.33 a share. Revenue beat estimates, as well, coming in at $2.78 billion.
BlackRock also raised its quarterly dividend by 15 percent to $1.93 from $1.68 a share.
On the economic front, Fink said, "The U.S. is going to get stronger primarily because we more rapidly fixed our banking system."
"We're getting better because our companies are sitting on a lot of cash. And I believe the outlook in the United States is stronger, so you're going to see more investing in capital expenditures in 2014 than you have in 2013 and 2012," he added.
"Most importantly, our energy sector is so transformational," he continued. "The cost of electricity, the cost of natural gas is so much cheaper here than Europe."
Fink said this is why he sees the U.S. economy growing at a rate of 3 percent to 3.5 percent this year.
He also predicted that inflation will remain tame, and interest rates in the bond market will be "more muted than consensus" forecasts.