Investors have witnessed some “pretty crazy” times in financial markets these past few weeks, with Thursday’s wild fluctuations ranking among the “craziest days of my career,” said Rick Rieder, the chief investment officer for global fixed income at BlackRock Inc.
during an interview with MarketWatch’s Christine Idzelis on Thursday to commemorate the website’s 25th anniversary.
Stocks, bonds and the dollar vacillated wildly on Thursday after a closely watched gauge of consumer-price inflation came in hotter than expected. The S&P 500
booked the biggest intraday comeback since December 2008 on a percentage-point basis, while the Dow Jones Industrial Average
saw its biggest intraday swing on a percentage-point basis since April 2020.
With all the volatility in the stock market, Rieder told Idzelis that investors might be better off parking their capital in short-term bonds, which are experiencing a renaissance as interest rates rise.
Volatility in bond markets was also intense Thursday, as the yield on the 2-year Treasury note
rose 16.2 basis points to 4.449% from 4.287% at 3 p.m. Eastern on Wednesday, marking its highest such level since Aug. 9, 2007
Indeed, after years of rock-bottom yields, bond investors have reached “nirvana” now that investors can earn interest rates in excess of 4% — and as high as 6% — from a mix of short-term commercial paper and Treasury bills.
“If I can get 4% to 6% in quality assets, I kind of think I would rather stay there for a while,” Rieder said.
Across asset classes, investors are facing a multitude of risks right now thanks in part to the strong dollar. The ICE U.S. Dollar Index
a gauge of the dollar’s strength against a basket of rival currencies, has risen more than 17% since the start of the year, one of its largest year-to-date moves in recent memory.
Rieder added that the problem with the strong dollar is “it creates stresses in other regions” and these complications in turn create problems for the U.S.
“The risk to the U.S. economy is the U.K., Europe and China,” Rieder said.
In addition to boosting the value of the dollar with its interest rate hikes, the Fed is engineering a global dollar shortage “and the pressure that puts on other economies is really intense.”
Rieder added in comments before the interview that some of the crazy swings seen in markets were being driven by trading in short-term options.