BlackRock's Rieder sees bonds offering income as stocks lose their edge

what happened

Rick Rieder, BlackRock's chief investment officer of global fixed income, told Barron's that the old rule of stocks being the only option in a world of low bond yields no longer holds. He said investors seeking income can now find attractive returns without taking on too much risk.

Rieder points to shorter-term bonds, debt of hyperscalers financing AI infrastructure, and emerging market bonds. His $17 billion iShares Flexible Income Active ETF yields more than 7%, with average duration under three years. He also expects the U.S. dollar to struggle to appreciate significantly given growing U.S. deficits, which would benefit emerging markets.

Rieder expects the Fed to raise rates in December but not by much after that, and possibly to start easing in the second half of 2027. He does not see a crisis brewing in Europe over France's deficit, though he flagged risks from upcoming elections and political rhetoric around budgets.

why it matters

Rising yields and steady demand for fixed income suggest investors are looking for alternatives to equities. Rieder also warned that unexpected moves in oil prices and fiscal strains in major economies could disrupt markets.

market impact

Bonds and income ETFs: demand for EM and AI-related debt; pressure on stocks if yields keep rising

tags

instruments