Speaking at the Yahoo! Finance All Markets Summit on Wednesday, an unexpectedly bearish BlackRock CEO Larry Fink joined the likes of Bill Gross, Jeffrey Gundlach and Ray Dalio who have similarly turned downbeat in recent weeks, and cautioned that the U.S. economy is in the midst of a slowdown and financial markets could see a significant setback, for the same reason the Trumpflation trade has fizzled out in recent months: uncertainty over global trade and the Trump administration's plan to cut taxes.
"I see a lot of dark shadows," Fink said at the Yahoo event quoted by Reuters. "The markets are probably ahead of themselves."
Fink should know: Blackrock is the world's biggest asset manager, with control of over $5.1 trillion in assets; he said investors are caught up in the potential for a restructuring of U.S. tax policy, which may not take place until 2018, something we warned about last December.
In the meantime, "disruptions to trade are a possibility." Trump has called for tax cuts as well as a wide set of changes to trade policy, including a renegotiation of the North American Free Trade Agreement with Canada and Mexico.
He added that "we're living in a bipolar world right now," and as a result speculated that the benchmark 10-year Treasury yield could fall below 2% or, conversely, rise above 4% ; however he sees a greater probability of rates falling as deflationary risks remain due to technological advances and rising protectionism. Still, he does not see the Fed reversing course course, at least not yet, and expects the Federal Reserve to raise rates in June and possibly again once more in the year.
Fink also said that "in my conversations with CEOs in Europe and CEOs in the United States they may be very bullish about what may come but most business people are not investing today."
As noted above, Fink is the latest major figure to call for a dose of caution after Trump's election touched off a rally in U.S. stocks. Bond investors Jeffrey Gundlach and Bill Gross are among those who have said the same in recent weeks.
Finally, Fink warned that there could be tension between the Fed's dollar-boosting policies and those of Trump as a stronger dollar could make it harder to revive export-dependent manufacturers.
In short: after focusing exclusively on the potential upside from the Trump agenda, with every passing day that nothing tangible materializes, the market optimism is fading to the realization that very little, if anything has changed.