Rick Rieder, Global CIO of Fixed Income at BlackRock, is one of the most respected and influential voices in the global asset management industry. Known for being a “data maniac,” as he himself admits, he oversees approximately $2.4 trillion (trillions in Anglo-Saxon nomenclature) for the firm, in addition to serving on Alphabet’s advisory board and UBS’s investment committee. His name was even mentioned as a possible candidate to head the Fed—at least, it was an option that appealed to the markets.
During his participation in BlackRock’s annual event for Latin American and US offshore investors in Miami, Rieder speaks with us. The room is spacious, a pleasant spring warmth filters through the windows, and his deep voice fills the space with comfort. The way he gestures with his hands reveals that Rieder is a methodical man; for that reason, we begin our interview by asking him about his working method.
How do you manage to isolate yourself from noise to do your work?
From my perspective, I am absolutely obsessed with data. I study it very intensely. I think there is too much focus on anecdotal information that is not very relevant, and it often creates inertia of biased information. I read a huge number of corporate earnings reports, which tell me what companies are doing with their inventories, why they are hiring staff, or what they are doing with capex. For me, that is the best source of information. I learn a great deal. In fact, I experience it like a game, like a treasure hunt: you read a report and look for clues. I also have monthly calls with clients, which I’ve been doing for 30 years, and I have my own process that involves reviewing about 1,000 charts and tables. Literally, I lock myself away to analyze them two days a month. All of that helps me piece together the puzzle, and I cannot do it without studying the data. Even though I have a great team that helps, I need to process it myself. Then I integrate all that information and build a view that is not always correct, but I need to go through that process.
As a result of that analysis, what differences have you identified between narratives and information?
We are seeing something we have never seen in this generation: an economy that works very well, but only with two engines. On the one hand, there is massive investment in technology, AI, and data centers, which is sustaining the economy and tech equity markets. On the other hand, there is a high-income cohort that is doing very well, even benefiting from high rates because they are net savers. The top 10% accounts for 23% of consumption, while the bottom 40% accounts for 22%. That is a huge distortion. Therefore, when you look at the economy as a whole, it appears strong—you can have nominal GDP growth of 5.5% or even 6%—but it is only functioning well on two fronts. The majority of the population is struggling, and that is why I have been quite clear regarding interest rates: they mainly affect those in a worse situation.
From all the information on corporate earnings, what relevant conclusions have you reached?
From bank earnings, I would highlight that M&A activity is real. It is clearly visible in the results: companies are becoming more strategic, making acquisitions to reduce costs and grow. Trading activity, especially in equities, has been very high, which makes sense in a volatile environment. Another point that I think has been greatly exaggerated is concern about private credit. During this earnings season, there was talk of stress, but I think it is often overstated by anecdotal stories. When you look at the results of major banks, the “mark-to-market” stress appears less severe than some interpretations suggest. As for technology, I am impressed by the figures. The market is pricing in explosive growth in the short term, but with caution in the medium term, because there could be technological changes that reduce demand. Personally, I think the market is being too conservative: demand has more runway than is being priced in.
Returning to your reflection on the distortion in economic growth, do you think there is an employment problem?
There is no job growth. In fact, excluding healthcare, we have lost 378,000 jobs over the past 10 months, which is surprising given an economy growing at that pace. We have an employment problem. From the outside, it seems the Fed does not need to do anything, but the reality is that the economy is not working well for most people. And we still have to see the real impact of artificial intelligence (AI), which has not yet arrived. It remains to be seen how all that technological efficiency will translate in companies that are already more efficient even before AI has its full impact. We have not yet seen that impact, and we already have no job growth. Some say it is not concerning because labor supply is lower due to immigration, but it is still a problem: there are not enough job openings.
We have read your analysis on the “weakness of the labor market” for young people. Is it a trend? Is it related to AI?
I think it is a disaster. The unemployment rate among college graduates is the highest in a generation, and youth unemployment (ages 16–24) is increasing. There are several factors: on the one hand, people over 55 are staying in the labor market longer, reducing vacancies, and on the other, we have the impact of technology and AI. I think it is a serious problem for young people and low-income groups. And it is ironic: older people, with higher incomes, benefit from high rates because they are savers, while young people are the ones with debt.
Let’s move to economic policy. What should we expect from the Fed? And regarding the deficit and interest rates?
I mean, first of all, the United States has too much debt, and almost all of it is in the short end of the yield curve. We rely on Treasury bills, and I think no company would manage its business like that. We need to reduce debt; otherwise, the dollar will remain under pressure. There are only two ways to do that: cut spending—which will not happen soon—or grow faster than the debt. This leads me to believe that the reason the Fed will cut interest rates is that a large portion of the country’s financing is short-term. They will have to wait a bit because of the impact of oil, but even so, I think they can make two cuts this year. If it were up to me, I would cut rates right now, regardless of oil or the potential impact on food. The longer we keep rates high, the more we worsen the debt problem.
As for the neutral rate that the market currently estimates, I do not think it is correct. I believe it is considerably lower than what is assumed, for two reasons: first, productivity is helping to reduce inflation, and second, the interest rate tool no longer regulates investment (capex) as it once did. Therefore, interest rates no longer significantly influence business investment, which is a huge difference compared to the past. In reality, rates mainly affect the housing market, low-income groups, and small businesses, which are the ones suffering the most. How could that not indicate that current rates are too restrictive? Moreover, they are not significantly reducing inflation. Therefore, I think they are restrictive precisely in the areas where it matters most.
That said, I have learned in my career that you must invest not based on what I would do, but on what they are going to do. It took me 20 years to understand that. I always thought: “this is a good idea, they will do it.” But the only thing that matters is what they will actually do. And I do not think they will cut rates now. I think they will wait one more meeting, analyze the data, unemployment will rise a bit, and then they will cut rates.
In this context of monetary policy, how do you interpret inflation?
There is a big difference between demand-driven inflation and supply-driven inflation. I think it is unfair to say we have an oil shock. I think we are facing a supply shock, and that shock, by itself, will already slow the economy. We do not need higher rates to curb it, as that will reduce consumption, especially among lower-income households. Today we are at core inflation close to 3%, and we believe it will fall to 2.5% by the end of the year. The Fed’s target is 2%, but that does not mean we need to get there next month. As long as it stays around 3% due to the oil shock, it will already have its effect.
Are you still very convinced about the rise of the fixed income cycle? Are we already there or has something changed?
We are in a golden age of fixed income. In five years, we will look back and say: my goodness, we could build portfolios with very attractive returns. Real rates are spectacular. You can build a portfolio with a yield of 6% or 6.25%. If inflation is at 3%, that is a very attractive real return. If you look at the 20 years prior to COVID, we had negative rates in Europe and Japan, and close to zero in the US. Now you can get 6% or more, and not with low-quality assets: you can use agency mortgages, AAA CLOs, AAA assets. When I say it is a golden age of fixed income, it is not because I think we will make a lot of money from rate cuts; it is more an environment of earning the coupon, capturing carry, and sleeping soundly. I think the Fed will act cautiously and that long-term rates will not fall too much.
Do you see value in the widening of corporate credit spreads?
I think public credit markets are simply fine; they are not exceptional. Securitized markets and emerging markets are more attractive in relative terms. I like places like Mexico and parts of Brazil, especially if you are willing to take currency risk—and I think you can, because I do not expect significant dollar appreciation. That is why emerging markets are more attractive than credit today. Securitized assets as well, since you can structure them yourself with better collateral. Securitization markets are in very good shape: commercial real estate, residential, asset-backed securities.
You mentioned emerging debt. In this case, the issue is the dollar, but do you like the Mexican peso?
I like the yield that Mexico offers. I do not have a strong view on the peso, but I do think the dollar will not appreciate much; it could even depreciate slightly. If we talk about the country’s debt, I think the administration is receptive to a weaker currency. So, in Mexico’s case, I think the peso against the dollar should remain stable and might even appreciate somewhat. But the important thing is that the yield is very attractive, as long as you are willing to take that risk. I use strategies in volatility markets, such as selling options on my positions, which allows me to generate even more return. Given that volatility in emerging markets, especially in currencies, is high, very attractive returns can be generated in places like Mexico.
For about three years now, BlackRock has made a significant innovative bet with the launch of iBonds. To some extent, you have been the “brain” behind these vehicles. Are you thinking about something equally revolutionary for the future in the fixed income world?
I think the big change in fixed income is that, for 30 or 40 years, fixed income was that 40 added to the equity portfolio in the classic 60/40. But in recent years it has been shown that it no longer works that way. From 2023 until now, every time the equity market has suffered, traditional fixed income indices have also fallen, because inflation affects both bonds and equities in the same way. The big evolution is that now people think about what to do with that 40 and whether they can build a source of income from it and manage it without taking excessive risks, in such a way that they can combine that income with equities and also with private assets.
What is needed is for fixed income to be stable. Traditionally, people thought they knew how interest rates would behave, but now it is different, and I think it will remain so in the coming years. Interest rates are still a useful tool, when they fall, equities rise and bonds also perform well, but that is not a good hedge nor does it create balance. It simply amplifies both positive and negative returns. The idea of managing a balanced and resilient portfolio has changed, and more and more tools and products are pointing in the same direction: helping investors generate income, which I will combine with equities, private equity, or other assets.
