BlackRock CEO Forecasts Prolonged Inflation, Highlighting Potential Beneficiaries

BlackRock CEO Larry Fink is predicting a prolonged period of higher inflation, but he believes that this can be beneficial for certain groups of people. In an interview with CNBC’s Jim Cramer, Fink argued that the fears of young people about inflation are overblown and that they are not seeing the issue in the right perspective.

Fink pointed out that when he and Cramer were young, they experienced worse inflation than what young people are currently facing. He mentioned the periods of high inflation during the Jimmy Carter and Richard Nixon presidencies, which reached peaks of 12.2 percent and 14.6 percent, respectively. In contrast, inflation hit a recent peak of 9 percent in June 2022, with the cumulative increase in prices since President Joe Biden took office amounting to roughly 18 percent.

Fink expressed confidence that we will overcome this period of high inflation and stated that he is bullish on today’s young people. He believes that they are smarter and have a more global understanding of the world compared to previous generations. Fink emphasized that economic growth is the solution to the problem of inflation.

In his annual letter to shareholders, Fink discussed the concept of “energy pragmatism,” which involves investing in both energy security and decarbonization. He argued that we can grow out of our inflation problem by focusing on these areas. Fink called for more private capital to be invested in energy infrastructure and other projects, which he believes will create jobs and drive wage growth.

Cramer raised the concern that younger generations feel like they have no money to invest, given the high costs of living, including expensive food and college tuition. Fink acknowledged that life is full of trade-offs and that if people don’t have enough for their immediate needs, saving for retirement becomes difficult. He suggested that people may have to work longer and raised the idea of raising the retirement age to mitigate the impact of high inflation on retirees.

Fink concluded by reiterating his belief that higher inflation will persist and that it can actually benefit those who are worried about it. He pointed to data showing that wages have been outpacing inflation since the fourth quarter of 2022. While this may not provide consolation for retirees on fixed incomes, Fink suggested that raising the retirement age could help delay the impact of inflation for some individuals.

The idea of raising the retirement age has also been discussed by U.S. lawmakers, including the Republican Study Committee, as a way to address the projected shortfall in Social Security funds. The Netherlands has already implemented a gradual increase in the retirement age in line with life expectancy.

In conclusion, Larry Fink’s forecast of prolonged inflation may be concerning to some, but he argues that it can bring benefits such as higher wages. He believes that today’s young people are well-equipped to navigate the challenges of inflation and emphasizes the importance of economic growth, energy pragmatism, and innovation. While there may be trade-offs and concerns about retirees’ financial security, Fink suggests that raising the retirement age could be a potential solution.