Larry Fink says:
- More outflows from mutual funds
- Recent rally caused by short covering
- Huge inflows in fixed-income meaning risk off
- Cash on sidelines
- Supply squeeze of investable assets (we saw some of this in REITs, HY bonds)
"I don't think we have enough evidence to justify these levels in the equity market at this moment," Fink said Thursday on CNBC's " Squawk Box ."
He said the recent rally has been supported by institutional investors covering shorts, or bets that stocks would fall, and not individual investors feeling bullish. "Since Brexit , we've seen ETF flows almost at record levels ... $18 billion of inflows," Fink said.
"However, in the mutual fund area, we're continuing to see outflows." What that tells you is retail investors are pulling out, he said. "You're seeing institutions who were short going into Brexit ... all now rushing in to recalibrate their portfolios."
Besides the stock mutual fund outflows, Fink said he's been seeing huge inflows in fixed-income products. "So you're seeing a risk-off trade, as we call it, around the world."
"I would not be surprised — I'm not predicting it — if somebody told me the 10-year Treasury is at 75 basis points, I would not be surprised ," Fink said. There's also $55 trillion in cash on the sidelines, he estimated. "You're seeing a massive reservoir of cash building up." Fink said extraordinary central bank asset purchases has been inflating stocks prices. "I don't think we should be at new [stock] highs," he said. "All the stock repurchases, you're seeing this reduction in investable assets."
