For Larry Fink, CEO of BlackRock, the market chaos of the first few weeks of 2016 is a bit of short-term pain for a long-term gain.
Fink, who heads the world’s largest investor, with about $4.5 trillion under management, said he thinks the markets will end the year higher.
But to get there, the market needs a bit of a shakeout.
“I do believe there is a need for blood in the street,” he told CNBC during an interview at the World Economic Forum in Davos.
“We need to work out all the excess inventories. In energy the only way that’s going to happen is through bankruptcies of some of the oil companies as they stop pumping. So this is all good. This is a good process actually. This market correction weeds out the weak.”
Some of the biggest names on Wall Street have been hobnobbing in Switzerland this past week, and the sharp sell-off through the first few weeks of the year has been one of the big talking points.
Scott Minerd, chief investment officer at Guggenheim Partners, echoed Fink, telling CNBC that the S&P 500 Index could drop another 10% to around 1650 to 1700. That drop, he told CNBC, would represent a buying opportunity.
“When you look further out on the horizon, you look at where we are especially in asset categories like bank loans, high yield. This is a very interesting time for people to be putting money to work. So this is not 2008 or 2009.”
Others are more bearish. Legendary hedge fund manager George Soros told Bloomberg TV earlier this week that he thinks China is transmitting its problems to the rest of the world.
Ray Dalio, the leader of the world’s largest hedge fund, Bridgewater Associates, is worried about growth in the global economy. James Gorman, CEO at Morgan Stanley, has said he can’t make sense of the market movements.
But according to Fink, the moves of the past few weeks are necessary.
“We can’t have a market that continues to go up,” he said. “You need these corrections and you need to find out what is a true foundation of a market. And we’re testing that.”
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