BlackRock CIO Rick Rieder says the conditions driving the equity market right now are among the most powerful he has seen, and that a massive supply-and-demand imbalance in stocks could make the next leg of the rally explosive.
In a new interview on Bloomberg, Rieder points to a combination of extraordinary market technicals and earnings numbers that he says the broader market has yet to fully appreciate.
“First of all, I think what it tells you is the technicals in the equity market are extraordinary, and the earnings numbers that are coming through are pretty powerful…
The parts of the economy and the primary drivers are doing quite well. You look at tech. You look at some of the numbers… and I was looking at some of the semis. You’re talking about 97% year-on-year earnings growth. I mean, like unbelievably powerful numbers.”
Rieder also points to the high-end consumer as a pillar of strength that is holding up better than the headlines suggest.
“You look at the high-end consumer, that consumption. You look at retail sales when you break it down, pretty darn good.”
But the most explosive element of his thesis is a simple supply-and-demand argument. With investors sitting on the sidelines and an IPO calendar that could bring a few hundred billion dollars of new supply to market, Rieder says the supply will be dwarfed by the sheer volume of stock that is going to be taken out of circulation this year.
“But what drives the equity market is in pretty good shape and the technicals. So you had this period of time that nobody wanted to buy stocks. And then you realize, you could have an IPO calendar this year that maybe is a couple of hundred billion maybe.
We’re going to buy back a trillion of stock this year. So we’re actually there’s not enough stock to buy. So talk about how explosive this is. You realize people sit on their hands: ‘I don’t want to do anything particularly in tech.’
And then all of a sudden, maybe a little bit of better news, the earnings come in, and then you create this… I mean, it’s amazing in the equity market how good the technicals are.”
Some of the biggest names expected to make their public market debuts this year are SpaceX, Anthropic and OpenAI.
Photo by Ronak Ramnani on Unsplash
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