Billionaire Larry Fink Says Financial Systems Are ‘Safe and Sound’—Is He Right?
If you’ve ever seen the ‘Everything is Fine’ meme, featuring a dog sitting at a coffee table while the house is engulfed in flames, then you may have an idea of where we’re going here. In recent weeks, billionaire Larry Fink, CEO of the world’s biggest asset manager, BlackRock, weighed in on the state of […] The post Billionaire Larry Fink Says Financial Systems Are ‘Safe and Sound’—Is He Right? appeared first on 24/7 Wall St..
Key Points
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Larry Fink, CEO of the largest asset manager in the world, believes the financial system is safe and sound.
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But given tariffs and the ballooning federal deficit, the investor who called the sub-prime mortgage crisis of 2008 warned that the economy is not out of the woods yet – not even close.
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If you’ve ever seen the ‘Everything is Fine’ meme, featuring a dog sitting at a coffee table while the house is engulfed in flames, then you may have an idea of where we’re going here.
In recent weeks, billionaire Larry Fink, CEO of the world’s biggest asset manager, BlackRock, weighed in on the state of the economy. He perhaps self-servingly declared, “The strength of the entire financial system is safe and sound.” While in theory it would be reassuring to take Fink at his word, the current economic and financial market signals appear to be screaming something completely opposite.
Tariffs alone have injected a great deal of uncertainty into the financial markets, leaving them feeling anything but safe and sound. In early April, when President Trump declared “Liberation Day” through sweeping tariffs, virtually no sector of the economy was left unscathed. In response, the bottom fell out of the stock market. The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite suffered declines in the range of 4%-5%, a magnitude not seen since the height of the pandemic.
Potential Economic Recession Looms
The stock market and the economy are interconnected, though their relationship is not always straightforward. While stocks have been volatile, the broader economy has indeed been shrinking. In Q1 2025, the economy contracted by 0.3%, sending shivers down the spines of many Americans that a recession could be just around the corner.
If you ask Kyle Bass, who is famous for predicting the sub-prime housing crisis of 2008, that is exactly what the economy needs before it can recover. Bass, who spearheads Texas-based Conservation Equity Management, recently told Bloomberg that a recession might be the only way for the economy to come through the tariffs and a ballooning federal deficit intact, stating:
“We have to make some difficult choices. Both of those things might be slightly recessionary, and if that’s true, we might have to go to a brief recession in order to rebuild our foundation.”
In Bass’ scenario, the economy would need to take a step or two backward before it can move forward. In Fink’s optimistic outlook, all is well. Bass’ views seem to poke significant holes in Fink’s theory, and the stark disconnect between these two perspectives leaves investors feeling anything but certain.
Financial Stocks Amid Uncertainty
With so much uncertainty, investors may be wondering whether to be long or short on financial stocks, including Wall Street stalwarts like Goldman Sachs or Fink’s own BlackRock. While these firms have undeniably built fortresses of balance sheets, they would not be immune from the implications of an economic recession. Consider what happened to Lehman Brothers during the Great Financial Crisis. The bank failed, marking the biggest bankruptcy ever in the U.S. and stoking fears of systemic risk throughout the financial landscape.
While the financial system may not be on the brink of collapse, and there might not be another Lehman Brothers waiting in the wings, it is also hard to fully subscribe to Fink’s association between the financial system and complete soundness, particularly in light of Bass’ sobering warning that things could indeed get worse before they get any better.
The post Billionaire Larry Fink Says Financial Systems Are ‘Safe and Sound’—Is He Right? appeared first on 24/7 Wall St..
