US doesn't have to fall into recession: BlackRock Inc's Rick Rieder

BlackRock Inc's Rick Rieder believes that the United States is unlikely to experience an economic downturn or recession.

Rieder's remark comes at a time when many on Wall Street have been cautioning of a recession for more than a year now, according to a Bloomberg report. 

BlackRock's chief investment officer (CIO) of global fixed income reiterated the stability of a consumer-oriented or service-oriented economy. He further stated, "I just think a recession is grossly overstated as a phenomenon today without some massive shock to the system."

Rieder expressed his views on whether the US economy is out of crisis mode in terms of inflation, he said that once the inflation rate reaches close to three per cent, it becomes less concerning. He further added that the monetary policy need not be overly worried about it. 

He said he has confidence in the downward trajectory of inflation and anticipates it to decrease over time and the unlikeliness of the unemployment rate going up. 

Rieder commented on the Federal Reserve's monetary policy and said that while goods inflation is approaching the target, services inflation might take some more time to reach the desired level.

He also expressed uncertainty about whether the target will be achieved in the upcoming year, however, he believes it to come close. 

Bloomberg citing Rieder added that the Federal Reserve might go ahead with another rate hike, potentially in November, although the future hikes remained ambiguous.

Commenting on how one should invest if there is no recession, Rieder shed light on the attractiveness of front-end yielding assets. He adds, "I bought some commercial paper the other day at 6.5% — one-year CP, 6.5 per cent. It’s like, I just want to go home at 6.5 per cent and just sit."

He also suggested a balanced investment portfolio, one that includes front-end yield assets, high-quality fixed income, and equity investments, particularly in companies generating significant returns on equity.

(With inputs from Bloomberg)