US stalemate ‘damaged stock markets’

BlackRock chief executive Laurence Fink, who last year said he would invest 100% of his personal wealth in equities, said stock markets may decline as a result of the political debate over the debt ceiling.

“I’m much more worried about the US,” Mr Fink, who as head of the world’s biggest money manager oversees $4.1 trillion in assets, said on Bloomberg Television.

“We are going to see a lower equity market and a longer period of lower rates” if corporate earnings start to deteriorate in the fourth quarter following the stalemate in Washington, he said.

Mr Fink said last week the US would have a “very poor” fourth quarter even if lawmakers reached a compromise and extended the nation’s borrowing authority because retail sales will suffer and uncertainty has led executives to avoid investing in research, technology and development.

Standard & Poor’s Ratings Services said yesterday the impasse had shaved at least 0.6% off fourth-quarter growth, taking $24bn out of the economy. The ratings company forecast 2% annualised growth in the fourth quarter, down from the 3% seen last month.

Mr Fink has said in the past he’s bullish on the US over the longer term, citing a strong banking system, an improving housing market and the nation’s large supply of natural gas. In January, he said he had lowered his expectations for the stock market in the first quarter after being disappointed by the bill US lawmakers passed to avert spending cuts and tax increases.

The government shutdown and debt-ceiling debate prompted Fitch Ratings to put the US on watch for a possible credit downgrade on Tuesday. The debt-ceiling debate has dissuaded foreign investors from putting money in US debt, Mr Fink said during the interview.

“Many of our foreign investors have had conversations with me and many at BlackRock about how should they think about investing in US debt over the next two years,” Mr Fink said.

BlackRock was co-founded in 1988 by Mr Fink, 60,