BlackRock's Rick Rieder Talks Trade Tensions
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Bloomberg Audio Studios. Podcasts, radio, news. We begin this out with trade tensions weighing on the tech sector. Rick Reeder of BlackRock writing, taking opportunistic positions in good quality companies in the equity market has and should continue to pay off for investors with longer time horizons. I'm pleased to say that Rick joins us now for more. Rick Reeder, it's been too long, my friend. Let's go straight to it. I just want to understand...

what you've been seeing with the team over the last week or so have the foreign buyers of treasuries been pulling back

So, I mean, boy, it's been an incredible period. I mean, so, you know, to start with, I mean, the Treasury market, the move back in the Treasury Friday was extraordinary. This pressure on the Treasury market, concern about international selling, that was pretty amazing. And then we bounced back pretty nicely as some calm has come back in. And then, you know, the volatility in the equity market, the daily volatility, a little bit calmer this week, unfortunately.

does present similar to what I said there before, it does present some opportunity in these markets. It is, I will tell you, the uncertainty though has led to liquidity in these markets that's pretty rough right now. When you go to execute, you got to be very thoughtful and very tactical about how you do it because markets are very jumpy and very uncertain these days. And Rick, typically the place you go for liquidity is the treasury market.

deep, predictable. That's why people buy treasuries. Rick, can I get your view on what you think was happening last week? Do you believe that was foreigners pulling back? Is there a question mark over the US safe haven status? Or is that just certain trades unwinding, things blowing up?

It's a great question. So first of all, when you have this pressure on the currency market, and by the way, it's super acute when you think about equities going down the same time that the currency is going down. Usually the dollar appreciates when you're in this risk-off mode. So you've unquestionably seen the pressure on equities and international disposition of the equity of a number of countries.

of US equities. In the rates market, it's a bit more blurred, but there's no question about it. There is some concern. We fund so much of our treasury debt internationally. There is some concern with the currency depreciating. And then quite frankly, the back end of the curve

going through these periods of spasm where inflation is higher, even if the Fed cuts, what does it do for the back end? There's an argument that when the Fed cuts, the back end becomes less tethered. And in fact, you get a steepening of the curve. So yes, I think there's some international disposition for sure as the currency weakens.

But I think broadly it's this uncertainty and it's just hard. You see, you watch days like Friday, you know, it's just hard stepping in, particularly in the back end with this uncertainty still out there. So Rick, at what point would you step in?

So I like owning the belly of the yield curve, and I like owning, you know, the front end has gotten pretty well priced. I mean, you've got to, and I think the way you all described it, you know, the Fed, you're pricing an awful lot of cuts for the Fed this year, and you haven't seen that hard data deterioration. I do think you'll see that in labor over the next two or three months. You'll see some pullback of probably some significance in places like healthcare and education, leisure and hospitality, but we've got to see it. But the belly

of the yield curve, there are some opportunities. And quite frankly, Europe is more interesting because you don't have the inflation impact in Europe. The ECB's got to cut more aggressively. So I actually think, you know, we've seen some real opportunities, actually European rates, very different. And by the way, you don't have the international disposition there. In fact, that's where you have probably international, I'm sure, you have international buying. So European rates is a place recently we've liked quite a bit. Can we

Take this a step further. You talk about how US Treasury markets tend to be the deepest, most liquid, and then you talk about how rocky liquidity has been and how execution risk has become an increasing consideration for you. Have we gotten to the point where on some of these days, the European rates market has actually been more liquid than the US rates market? Good question. So more liquid, I don't know if more liquid, certainly the back end of the yield curve.

It takes price to get execution. I don't know if it's more liquid. It certainly feels to me like you have this ballast of you've got an ECB moving, you've got a yield curve that's already pretty steep in Europe. And by the way, if you're a dollar investor, you get a cross-currency swap benefit. And because the curve's so steep, you roll down. So there are a lot of reasons why I'm sure others as well as ourselves have felt like, gosh, it's a safer place to be, even though

you're going to get European funding of fiscal initiatives over the next couple of years. That just takes some time. But I don't, you know, I still say the Treasury market generally is much deeper, but

But, you know, Europe, you definitely see more buyers coming in internationally as well as what we see in the States. Rick, it seems like the picture that you're painting is a regime change. The picture that you're painting is shifting away from the United States and following a real flood of money into some of the overseas markets and, frankly, not betting that the long end of the yield curve will provide the ballast that it has.

In the past, can you talk about what else has changed? Does this really undermine or reshape the way you look at 60/40 or the position of gold in your portfolio?

That is a long, it's a great discussion. That's a long discussion. A ton has changed. Like you say, we've added in the portfolios, not in our fixed income, but other portfolios, we've added gold. We think gold is a good hedge generally. Quite frankly, you have to, during periods like this, you tactically hold more cash in the portfolios. We've done that. Back end of the yield curve and interest rates as a hedge when you've got inflation moving potentially significantly higher.

not really a big benefit to the portfolio. And then the other one, when you get rates backing up, you can get your yield much more attractively using high-quality assets. So even though you're some pressure on parts of the high-yield market, pressures in the low-loan market, you can actually still create, I mean, one of our ETFs is Bink ETF. We're able to create over 7% yield and actually improve the quality of portfolio, run more cash.

that becomes super attractive. As long as you're not stretching, go down the credit structure into the triple C rated high yield, you can actually create more yield today. So I like the idea of

build some more cash, use some tools that are different than in the past, and then quite frankly just get higher quality and more liquidity in the portfolio. Rick, do you think the rhetoric around the fact that some investors are saying they're dumping dollars, dumping treasuries, that the U.S. is losing safe haven reserve asset level, do you think that rhetoric is overblown?

I'd say sentiment can change really quickly. I mean, we're in this period now where there's clearly a concern about the currency and there's clearly a concern about how do we bring the debt down? How do we get interest rates down? So I'd say near term, you know, there is a question. Listen, I think reserve currency status is something that is absolutely critical to the United States. We fund a lot of debt globally. The number of

you know, the percentage of trades in the world that happen in dollars, bills as a collateral for many of the transactions in the world. I think reserve currency status is absolutely critical. Are you denting it? You're definitely denting it. And listen, I think this year is going to change. I think we've got a couple of months here where there's a lot of uncertainty. You've got an economy that's

probably in recession today, in terms of certainly where corporate spend will be. But I think as you get into the back half of the year, things can really evolve. So listen, I think you're chipping away at reserve currency, but I don't think there's a natural alternative. And I think things can change. Hopefully they do. Rick, hopefully they do. But that last point that I think is important. If we are in recession today, do you think risk assets are appropriately priced for that scenario?

So I would say today, listen, I think the tail has gotten fatter. I think quality assets, they're pretty reasonable. There's a lot of quality assets we've been adding to agency mortgages, etc. Listen, I think you've got to put a wider range on the equity market today than you've had before. You've got an economy that's pretty uncertain.

And you've got to, you know, I think you've got to keep your beta a bit more restrained today. Quite frankly, one of the most interesting trades in the last couple of weeks has been to sell puts, you know, not to necessarily increase, but, you know, the best time to sell insurance is after a hurricane. And there have been some great trades that actually sell downside where, gosh, you know, if we go down another 10, 15, 20, depending on single name, go down 10, 15, 20%, you get paid handsomely for taking that. So keep your beta restrained, hunker down a bit in terms of risk.

but then find some place like, gosh, I would add if we came down, if markets went down significantly. So anyway, there are a bunch of things to do in this market, but I just think you have to expand where you think your return objectives are going to be and the probability around it in an environment like this. Things have changed a lot. Rick, it's good to see you, as always.

Rick Reeder of BlackRock there. Rick, thank you, sir. We'll do it again soon. Is this a negotiation or the new rules of the game? It could be either. It is up to the president how he wants to negotiate. A deal is going to be made with China. Nothing's over yet. There's been a lot of confusion up to now. A 90-day pause.

is not an eradication. Where is this leading to? Trust Bloomberg Television for all the context and clarity you need as the tariff and global economy story evolves. This year's bear case very quickly becoming the base case. Nobody covers tariffs like Bloomberg Television. Context changes everything.