Even though US stock valuations are close to historical highs, BlackRock's bond chief emphasized a key reason explaining why stock prices can continue to rise.
Rick Rieder, Chief Investment Officer of Global Fixed Income at BlackRock, stated at a meeting, 'There are no sellers.'
On the buy side, even though sustained high interest rates have increased the appeal of money market funds, the upward momentum in US stocks remains strong. He said, 'Think about the funding from 401(k) retirement benefits, some wealth, salary flowing into stocks, and there are no sellers.'
Rieder added that company buybacks are also supporting stock prices. He noted that large companies have repurchased trillions of dollars worth of their own stock, reducing the supply of shares and boosting per-share value.
He believes this offsets any valuation pressure, even as Deutsche Bank's new research shows that the adjusted price-to-earnings ratio of the S&P 500 is close to the highest level in the past century.
Although Rieder believes current valuations are too high, he added that if earnings improve significantly, the price-to-earnings ratio will return to a reasonable level.
He said, 'Including myself, people want the price-to-earnings ratio to decline. But this is really difficult; without serious events like geopolitical issues, the natural trend of US stocks is to rise.'
It is certain that Rieder himself has previously pointed out imminent risks, having predicted that US debt could lead to market turbulence, but this will not be an immediate threat.
Rieder said last week, 'I believe the market often reacts to the sharks closest to the boat. The 'sharks' in terms of debt dynamics will not approach the boat in January or February next year, but they will come close at some point. I don't know if it's in the second half of 2025 or early 2026, unless the government can address the scale of spending, the amount of debt we are issuing, and the inflation issues relative to this.'
Article reposted from: Jinshi Data