Blackstone

We are growing accustomed to wide daily swings in the Standard & Poor’s 500 and the Dow Jones Industrial Average. Triple-digit moves in the latter and double-digit changes in the former are no longer reasons for elation or alarm. The volatility can result from an unexpected economic report or a tweet from the White House.

Blackstone is pleased to offer the following Market Commentary by Byron Wien which shares his thinking on global economic developments, market insights and other factors that may influence investment opportunities and strategies.

Blackstone is pleased to offer the following Market Commentary by Byron Wien which shares his thinking on global economic developments, market insights and other factors that may influence investment opportunities and strategies.

Many investors think that this bull market and economic expansion have gone on long enough and a bear market and a recession will take place soon. In my view, we have at least a year or two before the next major downturn in either the market or the economy, barring a major geopolitical conflict such as a shooting war with North Korea, Russia or Iran.

Blackstone is pleased to offer the following Market Commentary by Byron Wien which shares his thinking on global economic developments, market insights and other factors that may influence investment opportunities and strategies.

There could always be an exogenous event like military conflict with North Korea, strife in the Middle East that cuts off oil flow or Russian aggression in the Baltics that unsettles markets. The market is assuming none of that will happen, and if the market is right, we have at least one to two years to go before we get into serious trouble. My overall conclusion is that there are significant investment opportunities outside the United States and many portfolio managers are under-weighted globally.

For some time now I have been concerned about the state of American competitiveness looking out a decade ahead. Innovation has been the lifeblood of our economic success, and nowhere has this been more apparent than in information technology since the advent of the Internet and the Smartphone. China has risen from being a largely agricultural economy when Mao died in 1976 to become the second most important economy in the world today. Still, many thought leaders believe its growth, even at modest rates, is unsustainable and that the country is good at copying the technology of others, but not as strong as an innovator of fundamental technologies on its own.

In my conversations with institutional investors I find a surprising lack of optimism about the outlook for equities. The capitalization-weighted Standard & Poor’s 500 was up over 11% year-to-date, excluding dividends, on September 18. Some would argue that only a few stocks are accounting for the rise, but the equal-weighted S&P 500 was up over 8% year-to-date as well.

Every year in August I organize four lunches for serious investors on successive Fridays in eastern Long Island. There are different groups of 25—30 people at each one and many of the great names of the hedge fund, real estate and private equity world attend, along with some academics and government folk.

I continue to believe that the two most important issues receiving inadequate investor attention are productivity and the role of central bank liquidity in the performance of financial markets. Productivity is critical to both earnings improvement and a rising standard of living.

The mood among investors in Europe is generally positive in spite of mixed cyclical and secular factors influencing the economies and the markets there. The cyclical forces are dominated by a better business tone across the continent.

There is no question that Asians are following the political developments in the United States closely, because America is a critical factor in the economies of the region. I was asked almost everywhere whether Trump would be impeached and I told questioners it was unlikely.

At the beginning of the year, most market strategists were in agreement that interest rates were going to rise in 2017. The reasons varied: some saw inflation climbing, pushing yields higher; others worried about bigger budget deficits; a few blamed the Federal Reserve, which was thought to be planning to raise short-term interest rates two or three times and shrink its balance sheet. Whatever the reason, interest rates were expected to head higher, so seeing the 10-year U.S. Treasury yield here at 2.3% is a surprise.

Donald Trump swept into office on a populist wave. His promise of greater growth for the United States economy resonated with a large part of those disappointed with stagnant wages and a lack of opportunity. He said he would bring manufacturing jobs back and provide better healthcare coverage at a lower cost.

There has rarely been a new presidential administration in the history of the United States that has tried to get so much done in its first ten days as the current one.

The Ten Surprises of 2017 have a generally constructive tone. President Trump campaigned promising significant change to the American people. He raised expectations, and that’s why he won.

Each year I make a practice of reviewing The Ten Surprises of the year that has passed. Last year’s list was on its way to being one of my best and then Donald Trump won the presidential election and everything changed.

Like many others, I was surprised by the results of the election. I guess I was persuaded by the polls that indicated that Hillary Clinton would win, even though the spread had shrunk to something within the margin for error.

When the presidential election is over, investors can focus on what is going on in the world economy and what future investment opportunities are lurking out there.

With all that is happening in the world – the U.S. election, the Brexit vote, various terrorist incidents, speculation about will she or won’t she raise rates at the Fed and other concerns – oil seems to have been pushed down the priority scale of market-influencing issues.