The uncertainty investors currently face is being intensified by the increasingly disruptive impact of technology, says BlackRock.
In a letter to shareholders, BlackRock chairman Larry Fink said technological disruption, in addition to social and geopolitical instability, is driving uncertainty within investment markets.
“Technology continues to disrupt many industries and even societies as it reshapes global employment markets,” he said.
According to Mr Fink, the global marketplace is undergoing significant technological and demographic changes.
“While the valuations of many high-growth tech firms have fallen in recent months, automation and innovation are accelerating, putting downward pressure on jobs and transforming industries.”
Quoting research by the United States’ 2016 Economic Report of the President, Mr Fink indicated that there is an 83 per cent probability that automation will replace jobs that have an hourly wage below US$20.
However, while advances in technology do pose specific industry and labour-related risks, Mr Fink said it does also provide investors with opportunities.
“The uncertain environment we face, while unsettling for many, is also an opportunity to look out to the future, to use technology in innovative ways,” he said.
Mr Fink added that slowing economic growth and social and geopolitical instability are contributing to the “tremendous uncertainty” currently observed in investment markets.
“Taken in totality, these and other risks create a level of fragility in the global economy that we have not seen since the lead-up to the financial crisis.”
“While there are some positive indicators, like sustained, albeit modest, growth in Europe and the United States, and the probability for ongoing recovery remains high, the tail risk if that recovery falters has profound and far-reaching consequences,” he said.
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