BlackRock's Rieder Says Sell the Volatility

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Transcript

00:00Let's set the scene. We talked about the first half of 2025. At the start of the year,

00:03the 10-year yield was at 4.56 percent. It rose to 4.8 percent shortly before Donald Trump took

00:10office. After Liberation Day, it sunk to 3.86 percent. Now we're stuck at around 4.27 percent.

00:15That's a pretty wide range, and it feels like everything has been priced in at some point

00:20during this year. What's not priced in? By the way, I'd say a couple of things. By the way,

00:27the best return opportunity this year across debt and equity markets is to sell volatility

00:32because it's been actually pretty amazing. You talk about these ranges. The markets tend to move

00:37one way, and then you could sell one side of it, and then the other. Selling volatility rates and

00:43equities has been a good trade. What's not priced in? Listen, I think there's something that's going

00:48to happen over the next year or so that I think is pretty spectacular. One, I think it's pretty clear.

00:52I was watching the interview with Secretary Besson today. The Fed is going to bring rate down.

00:58Second thing that's happening, you know, you've had, and he talked about it, inflation has come

01:02down. The three-month moving average core CPI is 1.7 percent. Pretty impressive. The thing that I

01:08think is not priced in nearly as aggressively, what's going to happen around automation, productivity,

01:14robotics, AI, is actually we're going to move to a place we're going to reduce the rate of

01:19inflation on a persistent basis, and I think that's the thing that people are going to focus

01:23on. Part of why I talk about buying the five-year point on the yield curve, you know, people say,

01:27where are the forwards priced? I think it's something that's going to be pretty interesting.

01:31Part of why I know I've said this is a golden age of fixed income, not because we're going to make a

01:34lot of money in interest rates. You're getting income now. That's pretty spectacular. Right.

01:38We're entering a point in time that's pretty exciting around how the world's going to change.

01:41So you just said a whole bunch of interesting things. I want to focus on what you're talking about

01:45when it comes to the long-term effects of AI and other forces when it comes to inflation,

01:51and that'll be a downward force when you extend the time frame a little bit. Can you invest around

01:57that rate now? Because maybe that's the long-term picture, but there's plenty of fears about inflation

02:01in the short term. So the answer is yes. I mean, look at it in the equity market today,

02:06not just the traditional hyperscaler investments, but as well the companies that are involved in cloud

02:13software, energy cooling. And you think about how well, you know, you had the deep seek thing in

02:19February, which was, you know, I like in our global allocation funds. I like tech. I like investing

02:24alongside this space. That was a wake up call. Like you still got to be careful about your beta

02:29technology's changing, but I think that that paradigm is real. So then you talk about,

02:34so let's relate that to what does it mean for interest rates? I think people underestimate,

02:37I mean, we use AI in functionally everything we do now. It's going to change the world and it is

02:44going to change the world around increasing productivity. By the way, for the U.S. economy

02:48and for the debt situation, if we get to a place where you can grow faster and you have a more

02:53productive economy, it means great things for in terms of bringing the debt down, which I still think

02:57today's the biggest tail risk we have the system. But if that plays out, if that economic transition

03:03plays out, that's pretty powerful.