Fund manager BlackRock expects the global credit crisis to last another two to four years as a weakening U.S. economy triggers more writedowns by banks, its chief investment officer for equities said on Monday.
Mark Lennihan / AP
BlackRock's headquarters in New York.
"The credit crisis will be with us for a long time," said Bob Doll, CIO and also vice chairman of the U.S. money manager, which managed $1.36 trillion in assets at the end of March.
"The deleveraging of the financial system, which is the outgrowth of the credit crunch, will likely last a couple of more years -- two, three, four," he said.
Financial institutions around the globe such Citigroup and UBS have suffered more than $300 billion of write-downs and credit losses during a credit crisis triggered by the collapse of the U.S. subprime mortgage market.
Doll said Blackrock BlackRock IncBLK
213.51 UNCH 0% NYSE
[BLK 213.51 --- UNCH (0%) ] is underweight on financials, but overweight on U.S. stocks since some large multinationals such as technology firms are benefiting from growth outside the United States and from a weaker U.S. dollar.
He said the worst of the crisis has passed after the Federal Reserve-led rescue of Bear Stearns in March, but he warned an economic slowdown in the U.S. threatens more credit-related problems in the months and years ahead.
"We've seen the worst of it in terms of crisis, writeoffs, but there is still more to come," Doll told a group of reporters during a visit to Singapore.
"A slowing below-trend growth in the economy will expose more of them. Whether it is in the mortgage area...or in other consumer loans, auto loans, credit card loans -- there are more writeoffs to come," he said.
Ratings agency Standard & Poor's said on Friday the number of companies around the world at risk of getting a credit downgrade climbed to a record in May amid the credit squeeze.
Doll said the U.S. economy was in for a period of slower economic growth but a recession was unlikely unless oil and commodities continue to rally.
"If these commodities continue to move up at a pace they've been moving up of late, all bets are off. The U.S. will be in a recession," he said.
U.S. crude's dramatic near-$11 jump on Friday -- its biggest-ever one-day spike in dollar terms -- fuelled concerns about inflation and consumers' spending power, a key driver of economic growth.
U.S. stocks slumped on Friday after the government said that the May unemployment rate jumped the most in 22 years and on oil's rally to another record, renewing fears that the U.S. economy faces 1970s-style stagflation.