What's going on?
BlackRock – the world’s largest money manager – reported first-quarter earnings on Thursday that handily beat market expectations, as the investment behemoth managed to increase the amount of money it manages despite the challenging investment environment.
What does this mean?
No doubt about it: 2018 thus far has been much more hectic than last year, thanks to things like US/China trade wars and heightened investor focus on stricter monetary policy in Europe and rising inflation and interest rates in the US.
That has big implications for a firm like BlackRock, which currently manages $6.3 trillion worth of investments for its many clients. According to BlackRock’s CEO, a number of its institutional clients (like pension funds) moved money into safer debt investments. Several of its corporate clients also reshuffled their holdings in order to fund other investments, encouraged by recent US tax reforms. Even after all that repositioning, though, Blackrock was able to grow the amount it manages – helping to boost both its profits and revenue above market expectations!
Why should I care?
The bigger picture: Investments in “exchange-traded funds” (ETFs) have declined as the stock market whipsaws. [tweet this]
One area where Blackrock didn’t see such spectacular growth was ETFs, “passive” investments that track the overall return of a list of stocks by purchasing small bits of everything in that index. The ETF has become a wildly popular investment product in recent years, but last quarter saw major stock indices like the S&P 500 suffer losses, putting off some investors.
For markets: Earnings season is soon to be in full swing…
First up on Friday are major financial firms including Citigroup and JPMorgan, who are expected to report rising revenues related to increased trading on market volatility (banks that pair buyers and sellers usually benefit from this uptick in trading volume). Altogether, profits in the first quarter for companies in the S&P 500 are expected to increase 18.5% versus last year – which would be their biggest gain in seven years!