- BlackRock boss Larry Fink says there's a key level in the bond market for investors to keep tabs on.
- Once bond yields break 5%, it could signal an inflationary shock to the stock market, he said.
- Treasury yields have been volatile as investors consider the impact of Trump's latest policy moves.
Larry Fink is eyeing one number in the bond market: 5%.
That's the key threshold for the 10-year US Treasury yield that could tell signal when a stock correction could be on the way, the BlackRock CEO said.
Speaking to CNBC on the sidelines of the World Economic Forum on Thursday, Fink said he saw a potential scenario where inflation fears cause the 10-year yield to enter the 5% to 5.5% range. If it surpasses that threshold, it could spark a repricing for stocks, he added.
"I have scenarios where it could be pretty bad," Fink said of his outlook for markets. "There's a probability we could see the 10-year over 5%, maybe even 5.5%. That would shock the equity market. That would not be a good scenario," he added, though he said that the scenario wasn't his base-case.
The threshold that Fink flags has been tested several times in recent years, usually with a negative reaction in stocks following close behind.
Yields in the US and globally have been volatile but have risen over the years thanks to issues like inflation, tariffs, and rising debt and deficits making investors nervous.
The 10-year US Treasury yield hovered around 4.1% this week, up more than 300 basis points over the last five years, rising from record-low levels during the pandemic as the economy entered a new era of elevated inflation.
Part of the latest uptick in yields has been a "sell America" sentiment that has settled over markets amid investor fears of waning Fed independence, which could potentially cause a spike in inflation down the road.
That trend appears to have accelerated in recent days amid renewed geopolitical pressures and new initiatives from President Donald Trump to lowerborrowing costs for Americans, which have only raised fears that inflation could rise down the line.
Fink added he saw the Treasury yield curve steepening in virtually every scenario going forward.
"There is a scenario where we're going to have much more elevated interest rates because of inflation. And that's going to have a very negative impact on the equity market, and it's going to change — it's going to force a revaluation," he added of stock prices.
How bonds will move in the near future depends on the delicate balance between growth and inflation, Fink said. He pointed to the billions in private capital being poured into the AI trade, which could boost economic growth, but also rev up consumer prices.
The post Watch this key level in the bond market for signs of an inflationary shock to stocks, BlackRock chief Larry Fink says appeared first on Business Insider