BlackRock's $1.7 trillion bond chief says the market's biggest fear is overblown

  • Rick Rieder, who oversees $US1.7 trillion as the global chief investment officer of fixed income at BlackRock, says market fears over Federal Reserve tightening are overblown.
  • He thinks that central banks are “maniacally focused” on not stirring up volatility.

As recently as two months ago, uncertainty around the Federal Reserve was among the market’s biggest fears.

Of particular concern has been the unprecedented unwinding of the Fed’s massive balance sheet, which is a reversal of the central bank’s extraordinary measures taken during the financial crisis. Now, with the Fed expected to raise interest rates by 25 basis points on Wednesday, that alleged reckoning could soon be upon us.

However, Rick Rieder, the chief investment officer of fixed income at BlackRock, who oversees $US1.7 trillion, thinks that any fears around Fed-driven volatility are overblown. In his mind, the central bank is predisposed to keep conditions as calm as possible, and he argues that it simply won’t inject chaos into the market.

In an interview with Business Insider, Rieder elaborated on those thoughts, and shared some other Fed-related wisdom. He also gave his take on the the GOP tax plan, the equity and bond markets, the rise of exchange-traded funds, and shared his biggest market fear.

It was part of a wide-ranging discussion that also included a deep dive into Rieder’s hectic daily schedule, which you can read about here.

Here’s what Rieder had to say (emphasis ours):

The one thing a central bank is not supposed to be is the instigator of volatility, and they won’t be.Central banks are maniacally focused on not being an instigant to disrupt markets.

As for the changing leadership at the Fed, the Federal Reserve chair tends to act differently than an elected official.They tend to continue the path laid out by the predecessor, while an elected official oftentimes tries to shift gears.

Also, when the Fed tightens it’s different than easing, in the sense that it can be behind the curve. You want to make sure growth is still durable when you’re tightening, which is very different than the easing process, where you want to be fast and ahead of the economy. I think they will be deliberate in what they do from here.

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