NEW YORK - Investors are expected to increase their allocations to stocks and bonds from cash after even "modest" Federal Reserve interest rate cuts, BlackRock's chief financial officer said on Tuesday.

Expectations earlier this year that the U.S. central bank would cut interest rates aggressively after hiking them to fight inflation have moderated in recent months as the U.S. economy continues to show momentum despite high borrowing costs.

"I think even modest rate cuts are going to fuel a very healthy amount of investor re-risking," said BlackRock CFO Martin Small, speaking at the Goldman Sachs U.S. Financial Services conference on Tuesday.

Lower interest rates are expected to eventually pull yields in money markets down from well above 4%, which is where cash-like instruments like T-bills currently stand.

So far, however, there has been little evidence that investors are abandoning cash. Assets in U.S. money markets stood at $6.77 trillion as of last week, data from the Investment Company Institute showed, up from $6.3 trillion in early September.

"There's still enough political and economic uncertainty in the world that cash is an attractive safe haven for clients," Small said.

"Market expectations for rate cuts ... are shallower and fewer," he said, adding that these and other factors had made money market fund balances stickier.

The U.S. central bank started cutting interest rates in September by 50 basis points. That was followed by another 25 basis point cut last month, with investors now betting on an additional quarter of a percentage point cut later this month. After that, further easing is largely expected to depend on economic data as well as the path of inflation.

Investors now expect interest rates of about 3.7% by the end of next year, which would be about 90 basis points higher than what was priced in September.

Still, Small said investors that favor cash were underperforming traditional investment portfolios that blended equities and bonds.

"That fear of missing out ... is contributing meaningfully to re-risking," he said.

BlackRock's fixed-income products such as bond exchange-traded funds had seen strong inflows this year, he added.

"It's not the floodgates ... but we've definitely seen more normalized allocations legging into fixed income," he said.

(Reporting by Davide Barbuscia; Editing by Stephen Coates)