Hard assets
“I’m a hopeful person,” Fink said during the Cramer interview. “I believe in 10 or 20 years humanity [will be] in a better position than it is today. With that view, I want to own hard assets today. I want to own equities. I want to be part of this economy.”
Hard assets or tangible assets — physical materials such as real estate, collectibles, precious metals like gold, and natural resources like oil, gas and food crops — are traditionally considered a safe haven during periods of economic turmoil and inflation. But Fink prefers certain types of hard assets over others. The Blackrock CEO has previously pointed out the risk to commercial real estate from rising levels of remote work.
Instead of office and retail, Fink prefers infrastructure assets.
“As the IRA is being implemented, these are good healthy long-term investments,” he says, highlighting the impact of the Biden administration’s infrastructure bill. He believes there are infrastructure opportunities that have the potential to deliver “anywhere from 8% to 15% returns with high probabilities of success.”
Double-digit returns are attractive in any environment, but especially noteworthy when they’re backed by hard assets.
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AI and robotics
Rising trade tensions, Fink believes, are a headwind for automation. “We’re going to see an acceleration of fragmentation of the supply chains because of geopolitical issues,” he says. “As we advance AI and robotics, there is such an enormous opportunity for nearshoring.”
Nearshoring is a term used by industry experts to describe the relocation of factories and manufacturing hubs to countries that are closer to consumers. But, considering that China is the world’s largest manufacturing hub, nearshoring in the near future simply means diversifying away from China.
About 70% of business leaders across the U.S. and Europe said they were actively considering nearshoring or reshoring, according to a survey by ABB. And 40% of them said automation and robotics were part of the plan.
Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) have already deployed robots to manage inventory in warehouses and recycle phone parts. This trend could accelerate as the automation technology gets more advanced and the need to bring manufacturing back home becomes more pertinent.
Fink’s optimism about these trends is palpable but investors must also consider that his firm makes money on general optimism. Better market sentiment translates to better capital inflows for Blackrock’s funds and higher management fees for the company.
As Warren Buffett once said, “Don’t ask the barber if you need a haircut.”
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