BlackRock’s Fink points to idle trillions of dollars in the market amid volatility

BlackRock CEO Larry Fink has warned that tens of trillions of dollars in financial assets are sitting idle in global markets. Speaking Tuesday at the Saudi-US Investment Forum in Riyadh, Fink said the pool of capital is parked in cash equivalents because investors are concerned about unstable conditions driven by trade disputes and the ballooning US trade deficit.

“There is €12 trillion just sitting in European bank accounts. In the US, $11 trillion is in money market funds,” said Fink, whose firm is the world’s largest asset manager with more than $10 trillion in assets under management. “When uncertainty takes over, people hoard cash. And that’s exactly what we’re seeing right now.”

Fink made the remarks shortly after US President Donald Trump landed in Saudi Arabia for a four-day tour of the Gulf. The president is expected to visit Qatar and the United Arab Emirates to mend economic ties and security coordination with the Gulf nations, including developments in Gaza and tensions surrounding Iran’s nuclear activities.

US financial health leads to cash hoarding

President Trump’s plans to renegotiate international trade deals have made global markets more volatile, but Fink noted that global investors are more focused on US assets. Yet, he admitted there’s a modest reallocation of investments toward regions like Europe, India, Japan, and increasingly, the Gulf.

Fink told the delegates that markets are on a temporary lull, but in the eyes of investors, the risks are still pertinent. “We’re entering another 90 days of uncertainty,” he explained. 

The CEO reiterated that discussions around fiscal deficits in the US are “absent,” even as the nation’s debt levels continue to grow.

“US deficits are a problem. To overcome them, the economy needs to sustain 3% annual growth. What Trump is trying to do aligns with what Saudi Arabia is doing, boosting public-private investment,” he reckoned.

Fink also praised Saudi Arabia’s Vision 2030 initiative, spearheaded by Crown Prince Mohammed bin Salman, which could help the kingdom reduce its reliance on oil sales and attract foreign investment into non-energy sectors.

“Saudi Arabia is building a 21st-century economy, and that is commendable. The focus on infrastructure and innovation is drawing real attention,” Fink lauded the Saudi government.

Falling oil prices and rising fiscal demands have forced the government to scale back some of its more ambitious plans, including developments like NEOM, in favor of projects with commercial profitability and those that align with upcoming global sporting events.

Stephen Schwarzman, CEO of private equity giant Blackstone, also acknowledged some difficulties in implementing the Kingdom’s transformation plans, but asked leaders to be “patient.”

“You’re going to achieve a lot,” Schwarzman continued, “but like all bold visions, some elements won’t happen. That’s normal with change of this scale. Don’t get discouraged.”

Markets react to US-China tariff truce

The Riyadh event takes place against the backdrop of an easing in US-China trade tensions, which has provided some temporary relief to financial markets.

In the agreement reached in Geneva over the weekend, the US announced it would reduce a previously combined 145% tariff on Chinese imports to 30%. In return, China agreed to cut its 125% duties on American products down to 10%. 

David Seif, chief developed markets economist at Nomura Holdings, said the rollback was “a far larger backtracking than expected.” He added that if negotiations fail to produce a full trade deal by August 10, markets could swing “very quickly in the other direction.”

On Tuesday, the Cboe Volatility Index (VIX), Wall Street’s so-called “fear gauge,” dropped slightly more than three points to 18.53, its lowest intraday level in almost two months. The figure fell below the index’s long-term average of 20 just before the US markets opened yesterday.

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